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July 2007

Global Supply Chain FinanceFirst Edition

Empowering CFO’s and Treasurers around EmergingGlobal Supply Chain Finance Issues and SolutionsEmpowering CFO’s and Treasurers around EmergingGlobal Supply Chain Finance Issues and Solutions

Produced by

Global Business Intelligence

Vancouver, British Columbia

Produced by


Vancouver, British Columbia

Download Provided by:



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The information, concepts and analysis contained herein are provided to you on a confidential basis and areconsidered proprietary to Global Business Intelligence (GBI). The facts of this Directory are believed to be

correct at the time of publication but cannot be guaranteed. The information herein reflects prevailing market

conditions, listing Sponsor input, and our judgment as of this date, both of which are subject to change. As

such, Global Business Intelligence cannot accept any liability whatsoever for actions taken based on any

information that may subsequently prove to be incorrect.

This directory is intended as a basis for discussion and thought provoking ideas and does not constitute

recommendations by GBI.

Global Supply Chain Finance - First Edition

@copyright 2007


Phone: 1.604.924.0851 Fax: 1.604.925.1394

Email: [email protected]

www.globalbanking.com



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Abbreviations

4PL, 3PL: 4th and 3rd-party logistics provider A/P: Accounts Payable

A/R: Accounts Receivable AML: Anti Money LaunderingB/E: Bill of ExchangeB/L: Bill of LadingBRIC: Brazil, Russia, India, ChinaBU: Business unit or operating companyCM: Contract Manufacturer

C-TPAT: Customs-Trade Partnership AgainstTerrorism

DC: Distribution Center D/C: Documentary CollectionsDPO: Days Payables OutstandingDSO: Days Sales OutstandingEDI: Electronic Data InterchangeEIPP: Electronic Invoice presentment & PaymentERP: Enterprise Resource Planning systemFCIB: Finance, Credit & International BusinessFCR: Forwarders Cargo ReceiptIOR Importer of RecordIT: Information Technology

KYC: Know Your Customer

L/C: Letter of Credit

M: abbreviation for millions

MNC: Multi National Corporation

OA: Open Account

OFAC: Office of Foreign Asset Control

PO: Purchase Order

POD: Proof of Delivery

RFQ: Request for QuoteRM: Relationship Manager

SBLC: Standby Letter of Credit

SC: Supply Chain

SCF: Supply Chain Finance

SMEs: Small Medium enterprises

SOX: Sarbanes-Oxley

SSC: Shared Service Center

STP: Straight-through Processing

TSP: Trade Service Partner

VMI: Vendor Managed Inventory

In a Guide such as this, many abbreviations are used. Below we providethe description for many of the abbreviations used throughout this report.



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• Supply Chain Finance has become an industry buzzword. CFOs and Treasurers of corporations are increasingly becomingresponsible for Supply Chain finance solutions, yet there is a general confusion as to how SCF works and the role of different players. For example, today's buzz words include reverse factoring, vendor financing, payables financing,receivables purchasing and trade payables backed financing, which all tend to be variations on the theme of the umbrella

term supply chain finance. These all refer to post-shipment finance programs.

• As the corporate business model becomes more globally distributed, we believe a Guide targeted at corporate end-userswill be helpful to better understand the application of SCF in a global environment.

• Global Supply Chain Finance (GSCF) technology and bank providers are developing new models for tradefinance. New technologies and financing approaches are emerging. In this report, you will find profiles of the leading

global supply chain finance solution providers split in the following – Buyer (Payable) and Vendor (Receivable)

– Platform providers

– Transaction risk managers

– Risk Carriers and Liquidity Providers

• Section A of this Guide provides an overview of the Global Supply Chain finance space, segments the space, andprovides key trends and evaluation criteria. Section B provides a detailed, independent write-up of example solutionproviders. Each supplier entry includes a concise history, an overview of the business model, its’ current situation andvision, contact person(s), and key business functionality.

• There is no hidden agenda in this Guide. It is an independent source for anyone determining how their companyshould proceed with global supply chain finance and working capital solutions. Whether you are simply assessing

what is available on the market today or just trying to understand what this space is about, this report will help keep youinformed about developments in this important sector.

Why we produced the Global Supply Chain Finance Report, Edition 1 2007:

I. Introduction to GSCF Guide

Background

This guide seeks to

empower CFOs and

treasurers dealing

with the myriad of issues around

implementing a

supply chain finance

program and

introduce them to key

solution providers in

this space.



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What is Global Supply Chain Finance?


• We see GSCF as four things:

– First, the Supply Chain Finance (SCF) solution is a combination of technology solutions and services that linksbuyers, their suppliers, and financing providers optimizing the visibility, financing cost, availability, and delivery of cash. Because of the extension of the supply chain, the increase in purchase to pay cycle time, etc. companiesare hedging their inventory with cash. Automating the Financial supply chain and employing networked financialservices can reduce cost of capital and create an advantaged ecosystem. The opportunity is less about justreducing the cost of finance within the buying organization and more about reducing the cost of financeacross the supply chain for all players – particularly suppliers that don’t have readily available sources of financing.

– Second SCF ties logistics and tracking of goods into finance decisions. A growing number of trade platformtechnology providers have emerged that enable container or cargo movements to be tracked by track and tracesoftware.

– Third, risk retention in its many forms ends up being one of the most significant aspects of the SCFprocess. Providing secure logistic and financial information paths to third-party liquidity providers and riskcarriers enables liquidity to be injected into the Global Supply Chain through the use of sophisticated credit and

pricing models.

– Finally, Trade Receivables, unlike Commercial Paper that is due on a specific date, may be paid late or may notbe paid in full for a variety of reasons. Trading in trade receivables requires the management of disputes andother discrepancies, whether the payment instrument is an invoice or a letter of credit.

There is an evolvingblurring of traditional tradefinance and SCFwith some banks, asthey seem to bebundling all trade

finance as supplychain finance.

End to end financing options – such asraw material or, productionfinancing, need to be

done across thesupply chain.Today, the market focus is around post shipment financedone when goodshave been shipped and invoices have

been presented.



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What’s driving the Growth of Global Supply Chain Finance?


• Globalization and the lengthening of the supply chain are the game changers shaping the new ground rules of business.Companies are outsourcing capital intensive plant, property and equipment and labor intensive activities to globalpartners down the value chain. In a relatively short period of time, companies have transitioned from manufacturers to

managing a complex web of third parties to make, store and distribute their products and brands. No longer is themajority of capital deployed to finance property, plant and equipment but to finance working capital (inventory,receivables, etc.).

• While the supply chain is lengthening as a result of globalization, direct sourcing, offshore production and distribution,many companies have experienced challenges in capital availability. For example:

– Traditional international financing vehicles are in relative decline, like the use of the Letter of Credit for both preshipment and post shipment finance. Most of these suppliers are Small /Medium enterprises (commonly calledSMEs), growing rapidly but having limited access to capital. Capital constrained SMEs are forced to raise capitalthrough traditional A/R factoring or indigenous local banks.

– Non OECD suppliers face pressure from large buyers in the form of extended payment terms. A 15-30 dayextension to existing terms would have a very positive impact on the P&L and balance sheet of a buyer spendingover €1bn with suppliers, but it could put serious pressure on contractors, sub-suppliers, etc. throughout the overallchain, and potentially disrupt production and goods flow.

– It is increasingly becoming a problem for manufacturers who have established offshore manufacturing (for example,moving production of low-value brands to China from the USA or Germany) to find financing solutions. A keychallenge comes from programs which require local content, such as various ECA programs.

– A growing and larger percentage of receivables are international (globalization, offshore, and in a separate legal jurisdiction) and those receivables themselves have longer terms-- a double hit. Many banks do not include thesereceivables are part of an ‘eligible base’ for lending.

Corporates are

becoming

increasingly aware

of the need for, and

availability of, new

SCF techniques.



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In financing cross border transactions, it is imperative to understand

that Non Related v. Related Party (or intra company) trade has

significant differences and impact on Supply Chain Finance.

Non Related Party (NRP)Related Party

Payment

•The market is segmented by those that are able toissue Commercial paper and those that are not.

•Many larger firms set up in-house banks to financevarious subsidiary trading.

Finance

Accounting

Credit Admin

• Transfer pricing and intra-companyreconciliations are major issues.

• Limited to minority subsidiaries

• Much of this trade is financed through intracompany netting and internal funding.

• The logistics process initiates the payment mechanism. For example, the two principal documents key to payment and financeare the Bill of Lading and the Bill of Exchange (B/E). The biggestfinancial difference with Open account and Letters of Credit and

Documentary Collections is the Bill of Exchange. The B/E is afuture date certain, amount certain, payment order. When passingbetween countries, a B/E must be a paper document.

• Terms can be from confirmed L/C to extended open account with just a commercial invoice.

• Open account sales to dealers, distributors, resellers, etc. requiresextensive credit application and analysis process to provide

customer credit lines. Letter of credit sales are sales to issuingbanks (not buyers) or confirming banks if confirmed.

• Corporates fund cross-border trade by:― using their own balance sheet by extending buyer terms― Invoice discounting and factoring (with and without

insurance)― Transactional finance using instruments such as the B/E or

promissory notes to sell for cash― Supply chain finance

―Usance L/C discounting

• Purchase Order / Invoice / Shipment reconciliation• Dispute Management reconciliation



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Introduction to this Guide

Section A Overview

I. The Problem Defined and the Current Environment

II. Market Segmentation

III. Import and Export solutions

IV. Data triggered Supply Chain Finance

V. Key CFO Evaluation Criteria

Section B: Key SCF players

I. Supply Chain Finance Platform Providers

II. Transactional Risk Managers

III. Liquidity Providers and Risk Takers

TABLE OF CONTENTS



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Section A

I. The Problem Defined& the Current Environment



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Order Placed Inventory

ReceivedSale Cash

Received __________________________________________________ Time

Accounts Receivable

Accounts Payable

cashpaid

DIH

“Cash

conversion

period”DPO

• Days Inventory Held (DIH) = Inventory/(Cost of Sales/365)

• Days Sales Outstanding (DSO) = Receivables/(Sales/365)

• Days Payable Outstanding (DPO) = Payables/(Cost of Sales/365)

• Cash Conversion Period (CCP) = DSO + DIH - DPO

• CCP measures the time between inventories and cash from sales

Companies that focus solely on their own balance sheet and P&L

statement look to maximize DPO and minimize DSO and CCP.

Understanding the relationship between DSO, DPO, DIH, and CCP

DSO



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Traditional Payment Practices Don’t Solve Problem…

• There are several challenges in VMI programs that will limittheir wide scale roll-out. Examples include C-TPAT,consignment law, accounting costs in warehouse transfers, andaccounting for who owns the inventory.

• Cost shifting vs. cost reduction

• Increased finance cost to supplier returned to buyer in form of

higher prices

• Vendor management of in-transit inventory

• Letter of Credit to Open AccountOther

• Discount costed into supplier price regardless of whether discount

taken – may result in higher price to buyer

• Could involve additional back office work with cross border trade, ascustom entry valuation must equal what overseas vendor was paid.

Aggressive management of ‘earlydiscount’ programs (2% 10 net 30 - buyer takes a 2% ad valorem discount if invoicepaid within 10 days of submission)

Early Payment

Discount Program

• Cost shifting vs. cost reduction

• Increased finance cost to supplier returned to buyer in form of higher prices

• Financially destabilizing for suppliers, potentially harming flowof goods

• Those most vulnerable forced to accept due to reducedbargaining power

• Suppliers not competing on production or quality capabilities,

rather financial access

Seeking supplier compliance to extendpayment terms from 30 to 60 days.

Unilateral Term

ExtensionWith Overseas

Vendors

Why FlawedExampleStrategy

In order to achieve better Balance Sheet and P&L ratios, companies apply

traditional payment practices, often resulting in a zero sum game or worse.

Source: PrimeRevenue



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Supply Chain FinancingOverview of Problem

• Supply chains are complex groupings of different types of companies that ultimately deliver a product to a

consumer. One goal of each company within the chain is to increase sales, which can be accomplished by offering

their customer payment options to make the purchase easier .• Raw materials are purchased from the commodity source by processors that fabricate them into parts used by component

suppliers. Components are assembled by suppliers and shipped to the manufacturer for use in producing the final product.The product is sold to distributors or direct to retailers who in turn sell it to consumers.

• Sales within the chain can be increased by providing the customer with better payment terms and straightforward paymentoptions (eg. No letters of credits). However, providing these options creates challenges for the seller depending on their

size relative to their customer. – Cost Problem: Larger companies selling to smaller entities have large costs associated with credit, billing,

collection and bad debt associated with extending flexible payment options to their customers. When this is done ona cross border, non related party basis, it adds further costs in terms of customs, compliance, risk management, etc.Fortunately, large companies tend to have ready access to plenty of reasonably priced capital to fund these options.

– Capital Problem: Smaller companies selling to larger ones have less process cost, but generally use very

expensive and limited capital to finance extended customer payment terms, creating cash and cash flow problems.

Consumer Retailer

Manufacturer Supplier

Processor

Commodity

Distributors

Increasingly done in multiple countries Domestic

In the USA, the

Federal Reserve

data indicates

there are 6 Trillion

in payables

outstanding (US),

which correlates

to 4% of finished

goods cost relates

to financing .





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• Who holds the inventory? Suppliers with lean manufacturing chains have another problem in that manufacturers want to pay for

components when used, but require suppliers to have a ready supply on hand under the manufacturer’s control. An example is a supplier that ships components to a manufacturer warehouse in Mexico. These components are treated as inventory of the supplier until used bythe manufacturer, at which time they become a receivable. Financing for this inventory is difficult for the supplier to obtain because their bank’s collateral is inventory under someone else’s control in a jurisdiction where the bank has little rights to recover it.

• Logistics infrastructure creating additional complexities. Many companies have a major issue with port congestion, rail and truckcapacity and will attempt to solve it by having their supply chain hold inventory (usually in their domestic locations close to their DistributionCenters or even in bonded warehouses in offshore. Bonded warehouse do not pay customs duty. The goods could not be removed until

the supplier agrees to let the Customer have them. Goods can be delivered to the Customer in a certain amount of time depending onlocation and customs clearance, or if domestic, 1 to 3 days from the time the warehouse is notified. Only after the goods are removed fromthe warehouse does duty have to be paid.

Supply Chain FinancingLean manufacturing supply chains are putting pressure

on suppliers (tier 1, 2, etc.) downstream.

Finished GoodsInventory

ManufacturingBuffer Inventory

Mexico warehouseFinished

Goods InventoryBuyer

Factory

Blanket

POEntry

CustomsEntry

Vendor Managed Inventory Example

Offshore / Overseas Domestic

Inventory call

The need for inventory remains because demand forecasting is not an exact science.

Title used to transfer on

FOB terms at the port

Under VMI, title does not transfer

until inventory called, an additional

‘x’ days to finance inventory



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• The Selection Problem - Most risk capital and liquidity providers only finance companies that have goodbalance sheets – they deal with distributors or suppliers of anchor clients and deal with their distributors –but in order to deal with them, must have recourse on the anchor client. Risk providers will only want goodrisks. Large Buyers are also often unable to manage smaller and/or weaker suppliers, leaving the most in

need of SCF without a solution.The Collateral problem - When Bank A and Bank B go back two stages in the manufacturing processwith Anchor customer A and B respectively, who gets priority?

• The Anchor client as the guarantor problem – If an Anchor client tells their bank they have suppliers anddistributors that are struggling with working capital, the bank will ask why don’t you just guarantee thetransaction and take the production risk. Now you are putting the Anchor client in the position in order tomake financing work for their direct suppliers or sub supplier they are now in position to take productionrisk. If you go one-step down and it’s the sub supplier that has the problem, not the integrator.

• Lack of adequate information problem - The challenge banks have found is that for many of the Anchor client’s clients, they may not have adequate information to bank them. In essence, unless the bank getsinvolved in the transactional side of the anchor’s business flow, it will not have enough quality information tomake good credit decisions with suppliers / buyers located overseas (who are typically small and mediumenterprises where good credit data is lacking).

• While hedge funds and insurance companies are well experienced in assuming credit risk for capital marketinstruments such as asset-backed commercial paper to finance receivables, these institutions strugglewhen business performance risk must be separate from credit risk.

Supply Chain FinancingOverview of Capital Problem

Client

(Anchor)Sub-

Suppliers

Spokes

CustomersDistributorsSuppliers

A Supply Chain Finance

model must be built

around financing

transactions and notcompanies. Just as thephysical supply chain madebig inroads in visibility, SCFplayers need to on financialside. Supply Chain Finance(SCF) improves the twin

challenges of visibility andcertainty. It improves theconfidence of third-partyfinancial institutions andbanks (FI’s), decreasing risk

–reducing cost and

increasing availability– of cash in supply chain.



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15%

39%

12%17%

12%5%

2%

12%

27%

7%

29%22%

0%

10%

20%

30%

40%

50%

60%

70%80%

90%

100%

0% Less than

25%

25 to 49% 50 to 74% 75 to

99.9%

100%

2005

2003

With more open account trade occurring for global trade, the use of

Letter of Credit to supply transactional finance has declined, hence

both import and export flows could benefit by GSCF solutions.

Import View

This is a substantial shift from our 2004study. Given the fact that both Chinaand India trade have grown at faster rates than world trade over this

timeframe, the results are even moreremarkable.

Buying agents may be picking up moreof the financial intermediary role (i.e.,helping buyers go open account but stillproviding financial services tosuppliers). Some companies also

mentioned providing financial incentivesto their vendors to change terms (i.e.,getting vendors paid faster for moving toopen terms).

Export View

With L/Cs coming down, what are thereplacements, how do people take aportfolio and mitigate that risk.Insurance has some capability tomitigate default risk and facilitatefinancing.

17% of companies

Percent of trade that is done on Letters of Credit:

Source: GBI 2006 Import study of 100 importers

There has been a significant shift away from the use of the L/C since GBI’s

importer survey in 2004. Only 17% of those surveyed have L/C use of 75% or

greater compared to 51% in 2004; we also found about the same use of

Documentary Collections, but the average use is much higher now.



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Section A

II. Market Segmentation





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Platform Providers

• Examples: AIG, Atradius

Below are examples of the Global Supply Chain Finance market segment.

Risk Takers – Recourse/Non RecourseTransaction Risk Managers

• Examples: GSCF, PrimeRevenue, Orbian

• Examples: Premium Technologies,Misys, William Stuckey, TradeFinanceSystems, XPCapital

Letter of credit and Open account

platforms

• UPS

• Examples: Banks, TradeCard,SWIFT’s TSU initiative

Banks

Non Banks

• Examples: CIT Financial,GE Commercial Finance

Hedge Funds / Specialized Investors

• Examples: Rosemount, Octagon

SCF technology facilitators sold

to banks, buyersLogistic Providers

SCF technology facilitators sold

to Financial Institutions

EIPP Platforms

• Examples: Xign, ERP systems

• Examples: EZD Global, TradeBeam

Global Trade Management SC

visibility firms

Buyers and their partners

• Examples: Wal-Mart, Home Depot

SCF Credit Data Processors

• Examples: Instream, First Data for credit cards

Credit Insurers



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EIPP

SCF Platform Components

Platform providers provide the necessary applications (payables,

receivables, EIPP, etc.) to help feed key liquidity and risk providers.

Finance

Presentment

Accounting Credit Risk Mgmt.

Processing

Data Translation Pmt. Processing

Purchase Orders Technology

Receivables Inventory

Products

Reporting Trans. Risk Mgmt.

Banks

Credit Insurers

Investment Banks

Buyers

Sellers

Hedge Funds

SCF Risk Takers and

Liquidity Providers

Letter of Credit Purchase Orders

SCF technologyfacilitators EIPP PlatformProviders Open accountplatforms ERP Vendors

Platform

Providers



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Platform Providers

Key Supply Chain Finance Components

SCF Components

Accounting Credit Risk Mgmt.

Processing

Data Translation Pmt. Processing

Reporting Trans. Risk Mgmt.

Presentment:The various parties to the relationship need a way to interact with thesolution. Best of breed leverages the presentment capabilities of anEIPP platform for Buyers and Suppliers, dispute resolution, etc and theGSCF platform required for banks and risk managers. Presentmentcould include functionality around:

• EIPP (Invoice)

• Letter of credit data• Purchase orders• Payable files

Processing:Invoicing, matching, reconciliation, payment processing, cashapplication, Letter of Credit processing, documentation platforms are all

part of processing. Two of the critical sub-components are discussedbelow:

• Credit Risk Management : The risk of Buyer insolvency and therisk thereon is well managed by banks, insurance companies andspecialized investors. The challenge is having a good way of pricing and tracking transactions within GSCF solutions, which isthe interface between Presentment & Processing solutions. The

best of breed solution would have multiple funding sources,tapping the lowest price source until capacity was filled beforetapping the next higher priced source.

• Transaction Risk Management : GSCF solutions also need tomanage transactional risk, including supplier fraud, paymenterrors and over-payments. This area also covers tapping intologistic information (eg. 3rd party, UPS) to perform transactional

risk management and intermediate capital when necessary.

EIPP Payable Files

Presentment

Letter of Credit Purchase Orders

Documentation



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The management and tracking of the physical movement of cargo is critical to track movement of goods. Thelogistic provider collects information about goods movement and provides this data to the transaction risk manager (which could be one and the same). The TRMs job is to verify, aggregate, and analyze data and provide it to the

risk takers. The bill of lading is typically the critical document to secure custody. Logistics expertise becomes criticalto manage problems whenever they inevitably arise (ie, rejected goods, buyer insolvency during shipment, etc.)

Insurance –

Transaction

and Credit

Funding

Transactional Risk ManagementTransactional Risk Management (TRM) can involve many components

– but the key one is merging logistics with finance.

Information

TechnologyInformation technology is an essential component in the management of the integrated finance and logisticsprocess. The risk takers receives information from TRMs in order to authorize financial transactions. Transactionrisk managers will typically have some risk management system to share data.

There is some form of Risk management done through the use of trade credit insurance to mitigate trade riskthrough cargo, credit and transaction dispute insurance.

For receivable solutions, Insurers have started to work with banks tracking the insured nature of the receivablesthey are lending against. What is required is a very clear picture of the state of the insurance, the buyers, and the

limits that are in place.

One of the most exciting aspects of the merging of physical and financial supply chains is the ability to trigger liquidity off a set of milestone events. Transactional risk managers may also take a proportional share of fundingrisk so the Risk Takers feel they have some skin in the game as well.

DescriptionRiskComponents

Integrating

logistic data



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Transaction Risk ManagementExample

Transaction Risk Managementexample components

Funding Line Credit & Collections

Transaction Insurance Credit Insurance

Bill of Lading

Risk Management System

Logistics Expertise

Interbank Debt

All Risk Insurance

Secure Custody

Example of how the Model Works:

• The Collecting Bank in the United Kingdom agrees to collection and credit worthiness at contract completion. The funding bankagrees to a $5million funding line. Coface issues a transactional insurance wrap. The Collecting Bank insures against bankruptcyof receiver and the transactional insurance wrap covers dispute.

• The key part of the process is writing the logistic plan into a risk monitoring system that gives everyone concerned visibility intocontainer movement. Under the Service Agreement, all parties to moving inventory from A to B agree an event process for tracking from cargo pick-up, loading, inland haulage, FOB, shipping, ETA, and actual arrival.

• Upon the shipping date, 70% of the money is moved from to seller, and all parties have visibility of shipping details.• In the event of a problem, a logistic team is alerted and can take the necessary value judgments on the inventory. Once inventory

is delivered at destination, the full value of the contract terms is collected and released to the funding bank.

• There is now an inter-bank debt scenario, insurance wrap and funding to pay for the B/L and begin the process of risk mitigation.

Situation:An emerging market seller in

Turkey is selling on 90 day

terms to an OECD buyer in

the United Kingdom. The

minimum commitment is 250

TEUs annually.

Seller seeks cash flow and through funding partners and

a transactional risk manager,

is able to take advantage of

the physical supply chain

triggers of in-transit inventory

and finance on a full non-

recourse basis. Fully Managed Service

Risk Mitigation





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Risk TakersMany major trade banks are focused on developing an integrated workingcapital platform to meet this new world of technology melding with theneeds of the physical and financial supply chain.

Working Capital Management /

Integrated Platform

Web-enabled

Banking

Trade andTreasury

Document / DataServicesPreparation /ArchivingMatching /Compliance /Connectivity

3rd PartyServices

Corporate Customers

• Logistics

• Compliance

• Documentation, etc.

Supply Chain Finance

Secure, multi-party

interactions

event trackingbetter terms, cycle timeand flexible finance

Key Point: As large banks develop an integrated working capital platform, there will be big differences in execution

capabilities. For example:• Ability to work with Logistics providers and offer value added services such as in-transit inventory financing• Compliance and the ability to do integrated processing of invoices, automatic compliance matching, etc.• SCF technology deployed (eg. white labeled through various platform providers, built by themselves, use of ASP

hosted solution, etc.)• Credit risk policies – eg, What can you do beyond leveraging buyer credit quality, such as financing off of PO or

non recourse v. recourse SC finance.• Move financial products away from paper finance structures.• Securitization services – how to make liquid



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• Many of the Hedge Funds don’t originate deals, but have a fund thatbuys trade paper.

– Non-bank money can provide a much-needed alternativesource of liquidity for the trade finance market.

– According to one market observer there are now at least six‘pure-play’ trade finance funds such as the two new models inexistence, as well as a number of ‘fund of funds’ (FoFs) thatinvest in trade finance funds as part of their investmentactivity. (source: TF Review )

– Big banks have tried to increase the depth of their secondarydistribution by selling trade finance assets to bond funds andinsurance companies, but there was always a lack of familiarity

with documentation as well as inherent documentation clearingobstacles that hindered marking to market activity and liquidity”.• A handful of funds have been established, including

– The LH Asian Trade Finance Fund invests in asset backedtrade and structured trade finance transactions ranging fromtraditional warehousing and collateral-backed transactions;

– Rosemount Capital Management which has established ahedge fund dedicated to trade finance globally;

– Tricon Forfaiting Fund Limited (Bermuda); – Eden Rock Capital Management capitalizes on the returns

available from factoring and other asset-based forms of finance; – International Investment Group’s (IIG) main IIG Trade

Opportunities Fund (TOF), which invests in global commoditytrade finance transactions;

– Octave-1 Fund, which invests in inventory finance, trade

finance, and asset-backed securities.

Risk TakersAt the moment, many of the hedge funds are only involvedin Supply Chain Financing as a buyer of trade paper.

Key Advantage of Capital Markets in Trade Financing:When banks underwrite a program they underwrite credit risk to aparticular name and have limited capacity to that name based on their credit policies. Price is based on a chunky rating, like BBB- or A.

If you look at credit pricing in the capital markets, there is a hugerange, you could be a AAA issuer, and there is a range of creditspreads. This is one of the chief advantages of the capital markets.

Second, through the use of derivatives, when a downgrade to a buyer occurs, there is not a sudden drop in the portfolio value.

Today’s Hedge Fund Tomorrow’s - Hedge Fund - SPV

Buyer Tier 1

Suppliers

Tier 2

Suppliers

Tier 3

Suppliers

Working

Capital SPV

Investors

Invoices

Approvals

MaturityPayment

Assignment



27

Section A

III. A. Example Import solutions



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• Import GSCF examples

• Pre-Shipment finance (eg. Finance overseas suppliers) – Leverage buyers credit rating for Pre Shipment finance and manage the

production and shipping risk

– Purchase of raw materials and production financing now that the Letter of credit is being used less on a relative basis for trade.

– Guaranteed PO Financing

• In-transit inventory

– Vendor Managed Inventory

– Inventory finance

• Post-Shipment finance- extend payables

– Buyer Centric Vendor Finance

– Early payment to suppliers, as part of the supply chain finance program.

– Extend payment terms by providing finance at the normal maturity of theinvoices.

What are some solutions for financing Imports around the Global Supply Chain?

Import GSCF Overview





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1. ElectronicPayableinformation

3. ImmediateFinance

4. Financebefore

maturity

High Level Payables Backed Supplier

Finance Business Model

• Payable date

• Amount

• Vendor

2. Log ontosystem

5. Paysupplier

Post Shipment Finance Model – Buyer CentricPayables Backed Supplier Finance

Receive Cash

up until

maturity Date

Discount

Receivables

Hold to

Value Date

Buyer

Platformor Bank (FI)

Seller

• Buyer Initiated – Confirms payment obligation

– Provides payment data -The buyer sends tothe bank a Confirmed Payables file specifyingthe dates on which invoice payments are to bemade.

– Data presented to Suppliers -Suppliers areadvised by the bank of the amounts and dateson which payments are to be settled on behalf of the buyer.

• Supplier Value

– Visibility Into payment details – Certainty of payment (Forecasting) – Ability to sell the receivable for cash – At maturity of each invoice the bank either

makes settlement to the supplier on behalf of the buyer (if no finance has been taken by thesupplier) or is reimbursed for its financing

using the buyer’s funds in those cases wheresupplier finance has been drawn down.

• This structure works equally well for bothdomestic and international trade.



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BUYER

Sell Goods

& Services

Ship Goods

\ InvoiceView Payment

Notification

Receive Cash

if No Discount

Consider the example of a Supplier (exporter) who negotiated a 30-day term with its’ Buyer. On Day 0, the Buyer receives the goods to its satisfaction and posts the approved receivable to the Supplier (exporter) and to the FinancialInstitution on Day 1. The Supplier then has the option to receive cash for that receivable at anytime up until Day 30.However, if the Supplier (exporter) chooses to hold the receivable to Day 45, it receives full payment and pays no fees.

PurchaseGoods &Services

GoodsReceived

\ InvoiceReceived

Invoiceapproved

Day 0 Day 1 Day 1 Day 45

Fund Payment

Original Term

Negotiate extension

Discount to Cash

Post Shipment Finance ModelBuyer Centric Example



32

Buyer Centric Solution Impact

Financial Impact

Reduction in Inventory

Interest Cost Savings

Reduce Overhead / Admin costs

Revenue Growth

Terms Negotiation

Credit Insurance cost reduction

Visibility into invoices

Regulatory Compliance

Supplier Management

Cash Flow Forecasting

Operational Impact

NoImpact

LowImpact

MediumImpact

HighImpact

BENEFITS FOR SUPPLIERS

Financial Impact

• Faster inbound cash flow, due to earlysettlement of invoices.

• Off balance sheet, non-recourse finance,potentially enabling an improved creditrating.

• Where the supplier is a SME and the buyer is a large credit-worthy corporate, the costof finance will often be lower than the SMEmight normally achieve on a standalonebasis.

• No longer necessary to take creditinsurance against insolvency, further lowering the cost of sales.

Operational Impact

• Free supplier payments for the buyer.• Cuts the cost of processing and reconciling

supplier payments and gives the buyer improved visibility of outbound cash flow.

• The bank takes on the administration of distributing funds to suppliers using themost efficient and cost effective means.

• Easy set-up, done through a web-portal

Post Shipment Finance ModelSolution Impact



33

Import GSCF in actionToday and tomorrow

Pre Shipment

Finance GSCF in action today: Pre-shipment finance via cash advances to facilitate pre production

• A leading global supplier of resins asked a new customer in Italy to give cash in advance for an order but thecustomer offered to have their bank give them a guarantee instead. In this situation, it is very important todetermine whether the guarantee is a demand guarantee or an accessory guarantee. Although they are bothcalled bank guarantees, they are very different and are even subject to different laws. In other words, if thereis a dispute, the accessory guarantor does not have to pay as they are essentially a co-signer on the contract

and therefore can assert the same dispute.

GSCF in action today: Leveraging Purchasing for overseas suppliers

• A large apparel manufacturer has many smaller suppliers that perform cut, trim and make operations. In order to leverage their size, the company purchased 10,000 yards of Gore-Tex at a favorable price compared totheir suppliers and warehoused the product close to their suppliers using a logistics company. The logistics

company would receive pick orders from the suppliers for certain fabric amounts and would cut and forward tothe supplier. Providing this form of pre-shipment financing not only saved material costs, but saved their suppliers expensive working capital to procure themselves.

GSCF in action tomorrow: Pre Shipment finance for overseas suppliers

• A transaction risk manager or platform provider can provide the hooks from the exporter factory floor to abanks processing center to see logistics, warehousing, and goods movement. The transaction risk manager can organize and manage the peripherals like goods inspections and most trigger events creating electronicmessaging and alerts. Data can be warehoused and mined to show vendor performance data both in historyand in current outstandings (egs. order fill rates, amount financed of a PO). Finance can be one global bankor pre shipment to the export bank and post shipment to the buyer bank and all data builds back to the buyer and his bank. In order to get this to work in emerging markets like India and China, local banks and or exporter must move to some type of Web interface for this data, whether that is done for them by a service provider or they do themselves.



34

Import GSCF in ActionToday and tomorrow

GSCF in action today: Company imports orthopedic shoes from Asia.

• It brings product into the USA and distributes around the world. Its’ financing dried up in Asia as much of itsproduct is off-shore inventory, either moving on containers or being shipped to end buyers. UPS Capitalprovided a full supply chain approach, where the container shipping moved from the company’s existingcarrier to UPS– SCS supply chain company. UPS Capital is financing containers in Asia and provides thecargo insurance. The only reason they can do that, is the data is in one system. They know when the

container was loaded, and when it is coming across.

GSCF in action tomorrow: Vendor Managed Inventory (VMI) Models in Shanghai

• Large importers such as manufacturers are now holding inventory in Shanghai and then moving it toMalaysia or Thailand for assembly. The number of warehouses being established in Shanghai is growingrapidly. A logistic company like DHL has working models with various financial institutions. Singapore'sGovernment offers tax breaks to those who can assemble product in their region. The software is there,

what you need are the various players, like platform providers with warehouse management systems and thelarge buyers and the logistic players and banks to get involved.

In-transit

Inventory

PostShipmentFinance

GSCF in action – Post Shipment Finance for overseas supplier

• An appliance manufacturer has been shifting much of its production out of Italy. Traditionally, suppliers in Italy are

paid on 120 day terms. Although sourcing in Asia may reduce costs, many Asian suppliers are unable to handleextended payment terms like that. What this company was looking for was a way to keep their existing paymentterms while working with more Asian suppliers. The company has been running a reverse factoring program for two years. Initially, the program was not successful with Asian suppliers as they required invoices to be pre-approved before being sent to the bank for discounting. They removed this pre-approval process. By setting upsome funding banks, their Asian suppliers can obtain much more competitive rates than they could from their local

Asian banks. The appliance manufacturer also saves administration costs, as they effectively make one paymentto the bank and then it is the banks that pays all the suppliers.



35

Section A

III. B. Example Export solutions



36

Export GSCF Overview

• Supply chain finance lending programs to a seller’s overseas dealers or distributors – Dealer Finance solutions - sellers are paid before or immediately after shipment and dealers pay lender

directly when goods are sold. This is where a financial partner can come in and offer a dealer financestructure. Under Dealer Finance, the bank will pay the seller for goods sold to the dealer either before or

immediately after the seller effects shipment. Then, once the dealer sells these goods in the market, theywill pay the bank directly. This proposition ensures an increase in the purchasing capacity and profitability of a sellers’ dealers. This is difficult in practice because the bank can’t control cash from the ultimatepurchaser, making the dealer a credit risk.

– Channel Finance - The core objective of Channel Finance is to provide integrated commercial and financialsolutions to the supply and distribution channels of a given industry. Channel Finance gives support to thecommercial relationship between sellers and their suppliers and customers. The commercial aim of ChannelFinance is to add value to supply and distribution channels by providing unique solutions that meet

customers' demands.

• Post Shipment Finance – Buyer confirmed payable finance structures

– Transactional based trade financing structures whereby the seller can proactively grant credit terms tobuyers without keeping the receivable on the balance sheet using negotiable instruments sold to fundingpartners for cash, without recourse. Instruments include:

» Bill of Exchange (B/E) Purchase facility- applicable to all industry segments» Promissory Notes – Invoice discounting facilities tied to Open Account trade

– Factoring – Non recourse

• Global Asset based lending – lending that is based on offshore production assets or in-transit inventory

• Open account trading platforms – lending for raw materials based on purchase orders or master productionschedules

What are some solutions for financing exports around the Global Supply Chain?



37

• Companies want to offer terms to their global dealer/ buyer/customer account network, and not use their balance sheet to do so. Providing discount terms is not going to work for many foreignbuyers where the order must be placed, transit time must be accounted for, and warehousing,distribution, sales, etc. must occur.

• Equipment exporters want to be paid, without recourse, upon shipment and presentation of compliant documents. Buyers in Latin America, Asia, Africa, Eastern Europe and other emergingmarkets seek loans, leasing, local currency financing, etc., with longer-term repayment periods. Cross-border export finance transactions are now in demand for sales of capital equipment, healthcare, withsix or even five-figure price tags.

• Open Account trading is dictated by the competitive nature of supply chains.

– Small or Medium sized Sellers generally have to offer open terms to large overseas Buyers tocompete –that is how many companies are offering finance.

– Large Sellers / Small Buyers require tailor-made trade finance solutions. The need for this ishigh, as what these companies require from banks is creativity on trade finance packages.

Saying that, we know financing small buyers cross-border is really risky business. The

finance entity, whether captive or not, needs to charge a very large interest premium tocover bad debt cost and return acceptable profit on utilized capital. This high interestpremium can be built into the buyer’s contract, which can make the product hard to sell,or can come from the manufacturer in the form of a contract discount.

Large sellers have put in place Captive Finance arms (egs. CNH Capital, MotorolaCredit, Cisco Capital, etc.) to handle these small buyer challenges.

There are numerous challenges with cross border export finance.

From a survey done by GBI,the top challenges for manyexporters in financing crossborder transactions in order of importance are:

1. Banks have limited

appetites for middle

market buyer risk in

overseas markets (ie,

resellers, wholesalers,

etc. are too small and

unknown)

2. Administration costs in

securing insurance are

too high

3. Lenders have minimum

size deal requirements

that are too high

4. Many times, finance deals

are offered only with full

recourse



38

INTERNATIONAL SALES FINANCE PROGRAM USING BILLS OF EXCHANGE

Exporter Bill of Exchange Agreement

1. Exporter executes a Bill of Exchangefacility Agreement

2. Exporter draws up Bill of Exchange which matches theamounts and maturity dates of the commercial invoices.

Exporter ships, sends invoice, bill of lading and bill of

exchange to Buyer’s Bank.

Buyer’sBank

Funding

Bank

Drawn Bill of Exchange

3. Buyer accepts the bill of exchange. Buyer’s bank sends

SWIFT message to the funding bank indicating that the bills

of exchange have been accepted, signatures are valid andthe signatories are authorized.

4. If Exporter decides to liquidate Bills- Accepted Bills,

invoices, shipping documents are conformed by exporter

and reviewed by funding bank. Exporter endorses bills

over to funding bank.

6. At maturity, funding bank presents bills to Buyer’s bank

for presentation to the Buyer for payment. Buyer’s bank willremit payment direct to funding bank.

5. Funding bank purchases the bills and funds Exporter.

$$$$$

• True off balance sheet sale

• Typical payment terms can be 90 days up to 1 year

• Funding is 100% purchase less transaction fees

Transactional Based FinanceBill of Exchange Purchase Facility

Buyer



39

High Level Payables Backed Supplier

Finance Business Model – Vendor Centric

Post Shipment Finance Model – Vendor CentricReceivables Backed Finance

• The process of handling receivables from vendors rather thanapproved payables from buyers carries a much higher degreeof complexity. Starting from the credit side, there exists not onedebtor but many, with varying conditions and payment terms.The receivables based program is complex and requires adramatically better processing intelligence than the onerequired for handling payables.

• Platform providers and or liquidity providers must interface withthe systems used by large vendors to have visibility into theshipment details to the various logistics service providers.

• A system must be in place to use invoice information matchedto this logistics data.

• Buyers may be asked to confirm the invoices to be funded ontheir behalf to the respective vendor.• The invoice sale can be done both on limited and non recourse

basis, depending on the vendors' buyer portfolio quality.

Example• Vendor based in Canada and sells electronic goods on a

regular basis to a buyer in Mexico on 60 day terms.• The Vendor wants cash earlier and the buyer wants to pay

later to cost-effectively fund the working capital investment.• Buyer provides purchase order approval• Logistics provider provides evidence of shipment and track and

trace capability• Vendor provides invoice data

• Vendor gets paid on day 10, buyer pays the bank on day 75.

4. Purchase order confirmation

2. Host to host track &trace provided

6. FundInvoice

Liquidity

provider

Buyer

Platformor Bank (FI)

Seller

Forwarder

3. Purchaseorder approvalrequest

7. Repayment of funded invoices

5. FundingRequest

1. Invoicedatadownloaded

Vendor Centric Receivables Financing

Transactional Based Export Trade Finance Structures



40

Transactional Based Export Trade Finance StructuresProgram Differences

■ Factors take no cross-border risk, and infact, generally only cover buyers in low-risk, developed countries where securityinterest laws are well-established.

■ 70-85%■ 80% to 100% (less finance fee)

■ Insurers generally take a maximum of 90%

■ Factors take 100% of thecommercial risk

■ Lower

■ Insurers wait until 180 days after the duedate (or it is established that the buyer isbankrupt)

■ Supplier responsible for collecting owntrade debt. Insurers take over once areceivable has gone 180 days past due (or the buyer is bankrupt).

Advance Amount

Commercial Risk

Cross Border Risk

Payout

Finance Fee

(Discount)

Services

■ Factors pay out within 60 days after the duedate

■ Factors take over the entire collectionprocess and can offer credit assessment of the client’s trade partners to assign creditlimits.

The rule of thumb is that factoring coststwice as much as insurance. This reflectsthe costs of collecting receivables, the cost

of insurance, and the higher indemnitylevel.

■ Without insurance, Financiers can notbe confident of his title to the invoicewithout formal and proper control over the invoice itself.

■ 100% of invoice value (lessfinance fee)

■ Buyer Payment Confirmation

Legal Structure■ Can be structured as Recourse or Non

Recourse financing (off balance sheet)■ Non Recourse financing (off

balance sheet)■ Typically some element is

recourse financing

■ Supplier clears receivable atpurchase

■ Automated platformfacilitates both approval andfunding process

Can be lower based oncounterparties, for example, if buyer investment grade.

Info Supplied■ Reliant solely on information from

Suppliers■ Reliant solely on information from

Suppliers■ Reliant on Buyer payment

confirmation

Invoice Discounting or

Receivable Finance(with Insurance) SCF ProgramFactoring



41

Section A

IV. Data triggered

Supply Chain Finance

The traditional lending model is starting to give way to supply



42

P.O. or

L/C Issue

Order

AcknowledgedProductionDoc Prep /

Ship

In-Transit /

Customs

Cleared

Order

Received /

Verified

By Buyer

Invoice

negotiation /

Approval

Payment

Pre-Shipment Phase Post-Shipment Phase

Traditional Model – Lending Facility Based Financing

• Supplier working capital

• Inventory financing?

• Packing Loans?

• Bills of Exchange facilities

• Promissory Note facility

• Factoring / Invoice Discounting

Transactional Data Triggered Financing

• Partial advance on Purchase Order / Letter of Credit

• Payments at pre-arranged points (eg.

Goods inspection)• Inventory in-transit financing

• Event-based advances

• Payment against delivery docs

• Vendor managed inventory pulls

• Buyer risk-based invoice finance

The traditional lending model is starting to give way to supply

chain finance with the thought around using various events or

triggers in the supply chain to release cash.

Key Point: There are five main triggers that we see for SCF (1. PO issuance; 2. some verification of manufacturing status: 3. Invoiceissued; 4. Invoice approval; and 5. some VMI feed. From our discussions, no bank, finance house or logistics company is active inmore than a few forms of trigger point international finance. The two generating the most cross industry interest are buyer supportedvendor early payments triggered off of the approved invoice and pre export financing triggered off of an established PO.

Banks are looking to build event triggers around a few key areas:



43

g gg y

the paper flows around the PO, visibility into the logistic flows,

and finally, more efficient payment flows.

3rd Party

Exporter Bank

Exporter

Importer

Importer

Bank

Acknowledge /

Accept

PO

details

Advanced

Ship Note

In the past, the Financial Flow lacks any standards and generally has little if any Logistics integration.

Contract

PO

Issued

Accounts

Rec Created

Invoice Sent

Goods

Goods

Goods

Invoice

Received

Recon-

ciliation

Goods Receipt Note

Inv

approval

Payment

Instruct

Remittance

Advice

AP

Reversed

Credit

Advice

AR

Reversal

Payment flowLogistics flowPaper flow

Traditionally, the Treasurer only got involved around the reconciliation andpayment issues, but that is starting to change with Supply Chain finance.

Developing a more event triggered supply chain is still in the making While a



44

Trade FinanceTrigger 1 - PO

Payment

Obligation

Issued final

release of cash

Day 10

Previous payment

terms -Delivered Duty

Paid plus 45 days

Developing a more event triggered supply chain is still in the making. While a

few large banks are working with logistics companies, to date there is still very

little public knowledge of these programs being widely applied.

Example: Major technology manufacturer mandating allsuppliers come off of L/Cs and use this payment process

Day 40Trade Finance

Trigger 2 - Goods shippedevidenced by bill of lading

Day 85Trade Finance

Trigger 3 - Invoice

FI finances 25%

of the PO value

through the

platform

PO Initiation PO validation Invoice

Delivery

Completion Compliance Finality Supplier Settlement

• Platform reconciles invoices to original Purchase order (allows for partial shipments)• Amount released for financing will depend on Financial institution• Supplier managed inventory held by Supplier until drawn by Buyer could be another trigger point• Different events could invoke financing triggers (eg. Customs release, goods inspected, etc.)

FI finances 50%

of the invoice

value shipped

Bill of Lading

Issued

Day 50

Buyer approves

invoice

Maximum Advance

50% 75% 80% 85% 90% 100%

Risk On Supplier Acceptance

Risk on buyer

Key Points:



45

Section A

V. Key CF0 Evaluation Criteria





Section B



48

• We would like to thank our Listing Sponsors on helping produce the first GlobalSupply Chain Finance Corporate Guide and encourage you to contact themregarding specifics around their solution capabilities.

• Platform examples

– Bolero – CGI-AMS – PrimeRevenue

• Transaction Risk Managers – Instream – UPS Capital

• Funding / Risk Providers – ABN AMRO – Bank of Montreal Capital Markets – GE Commercial Finance – JPMorgan Chase

– HSBC – Morgan Stanley – National City Bank – Royal Bank of Scotland (RBS) – Santander Group – Wachovia

Section BIntroduction



49

Section B

I. Platform Providers



50

Bolero

Web site:www.bolero.netKey Contact:

Arthur Vonchek, CEOTel: 44.207 759 7079

Solution’s Technology

Functionality:

Bolero is a neutral secure platform enabling paperless trading betweenbuyers, sellers, and their logistics service and bank partners. The Open Account Trading Platform providing paperless support of the Open Account trading process from PO distribution, Supplier creation of invoiceand related shipping documents, electronic presentation of Supplier documents to the Importer and rules-based fully automated compliancechecking. The application does not include the financing application(s).

Comprehensive

None

Specific Function

Key

Strengths

Key GSCF

Strengths

SolutionOverview

BackgroundLaunched at the end of September 1999 by the logistics and bankingcommunities, Bolero is a global initiative to move trade onto the Internet. TheBolero System provides secure electronic transmission of business data anddocuments along the entire trade chain from front-end order processing andmanagement to back-end trade document exchange. In December 2000,Bolero successfully completed a $50 million first round of funding.

Bolero is active in US, Asia and Europe with marquee customers in all threeregions. The solution is centrally hosted and operated by SWIFT, so regionaloffices are sales, marketing, consulting and support.

Payment /Settlement

Support

Letter of Credit /Documentation*

Purchase Orders /Open Account

PlatformsEIPP

Transaction

Risk Mgnt.

Credit RiskManagement

* Note: Not examined here as part of a GSCF solution

• The Bolero application serves as the infrastructure to support decisioningand risk management and access to multiple independent sources of financing.

• Deployed as a neutral trusted third party platform, enables secure accessto/from multiple sources of financing

• Sophisticated rules-based matching and compliance provides opportunityfor multiple trigger points in the supply chain process.

• Dematerializes the whole supply chain enabling automation of paymentsundertaking.

• Enables extension to supply chain service providers (e.g. logistics)

• Multiple deployment options (by corporate anchor, outsource serviceprovider, white labeled by bank, etc.)

Bolero



51

BoleroScope and Functionality of Global Supply Chain Finance Solution

What areas of the GSCF universe does your solution address?SOLUTION

Working Capital Financing

Payables DiscountingThe Bolero Open Account solution istargeted primarily on Retail, althoughalso applicable to consumer hightech and other high volume Importerssourcing primarily from Asia. This isaimed at a Fortune 1000 anchor client to incorporate their suppliersinto a dematerialized open accountsettlement process and in support of primarily Vendor Financingprograms. The solution is intended tobe applicable for all suppliers to theanchor being delivered as a hostedweb-based solution with lightSupplier footprint (Browser only) andconfigurable supplier workstation(supports doc prep as well as

different levels of upload downloadand inter-operability). The solution isoffered as a service to three targets;a) to the anchor corporate b) to abank to offer as a service provisionincorporating the bank’s and othersSC Financing solutions, and c) to anon-bank service provider as the

basis for the provision of provider-neutral financing.

High Level Bolero Open Account Trading Platform

Business Model

• Open Account Settlementprocess outsourced toBank partner

• Automates “firm paymentundertaking”

• Bank provides authorityand through participationin the process can extend

lower cost financingacross the supply chainusing authority and healthof Buyer to manage risk

• The Importer gets visibility,and cash flexibility withoutpassing the buck toSuppliers

• Suppliers get visibility andaccess to cheaper andmore flexible financing

• Bank gets outsource andfinancing business

• Overall Supply Chaincosts and cash bothreduced

Service

Provider

SuppliersImporter

Sources of

Finance

The Bolero rules

based compliance

makes it possible to

provide validated

trigger points at

defined stages of the

supply chain and/or

on certain matching

criteria being met.

Delivered as anauthenticated and

secure message to

the source of finance

allows risk decisions

related to finance.







CGI Proponix



55

Platform Supports following SCF:

Approval to Pay (ATP)

A new bank-assisted open account product thateliminates the bank exposure fees that a customer would pay under an LC, while providing some LC-likebenefits. An ATP is typically based on POs and issuedlike an LC, with the buyer’s conditional payment termsspecified, and no bank guarantee. It provides astructured framework from which open account tradingservices like document checking, PO/Invoice matching

and tracking, PO or invoice finance, seller payment, andbuyer side finance can be offered.

Open Account Payment (OAP)

An Open Account Payment is similar to a straight tradepayment, except it is initiated when the bank receives

invoices from the buyer with instructions to pay whendue, which could be in 20, 30, etc. days. The invoicescan be eligible for export financing from initiation of theOpen Account Payment until the due date of theunderlying invoices. The buyer’s bank can directlyfinance the seller, or establish a buyer-backed seller finance program to support the sellers financing. Ineither case, the financing would be retired on the invoice

due date when the payment is executed.

CGI ProponixScope and Functionality of Global Supply Chain Finance Solution

What areas of the GSCF universe does your solution address?

Export Finance for Export Trade Finance

The export bank of either an export letter of creditor outgoing collection can provide pre-shipment,shipment, or post shipment financing, to provide

financing at various points in the order-to paylifecycle.

Direct Seller Export Finance

for Open Account / Import Trade Finance

The buyer’s bank can directly finance the seller with pre-shipment, shipment, or post-shipmentexport financing. For banks that offer direct seller financing it can be based on the POs or invoicesthat have been downloaded and linked to approval

to pay instruments, open account payments, andimport letters of credit. For straight accountsreceivable financing the invoice data can be linkeddirectly to the finance instrument.

SOLUTION

Buyer Centric SCF

Proponix SCF

supports buyer-

backed seller

financing from the

approval to pay and

open account payment products.

Seller Centric SCF

Proponix SCF support

a range of export financing for LCs,

collections, and

receivables.

CGI Proponix



56

CGI ProponixScope and Functionality of Global Supply Chain Finance Solution


SOLUTION

Platform Supports following SCF:

Buyer-Backed Seller Export Finance for

Open Account

Often the seller’s size and geographical locationmeans that local financing is very expensive andunreliable. Buyers on the other hand wish toextend payment terms for as long as possible toenhance their cash flow. Furthermore, theexpensive seller financing makes extending longer terms to the buyer prohibitive, and places upwardpressure on the seller’s pricing.

The solution therefore is often buyer-backed seller finance that creates a win-win situation for thebuyer, seller, and even the bank. This supply chain

optimization technique gives the buyer longer payment terms and lower prices, while the seller gets reliable and cheaper finance, and the bankgets new revenues for lending and activity fees.Proponix SCF supports buyer-backed seller financing from the approval to pay and openaccount payment products.

Receivables Finance

With this capability a any number of the seller’s invoices

can be discounted in full or part. Sellers can instruct thebank to make repayment through a repayment interfacethat identifies the invoices to be repaid.

Buyer Side Finance

Whenever the buyer has an obligation to pay under an

open account, import trade finance instrument, or another import finance instrument, the buyer’s bank can extendbuyer side financing to the buyer.

Transactional Risk management

In addition to the denied party checking that is applied to

all Proponix instrument data, all linked purchase ordersand invoices are also checked. Embedded creditmanagement, or interfaces to central credit managementare integral to the solution. Also, numerous methods areused to ensure that correct payments are made, includingembedding the liquidation of invoice financing into thepayment process to enforce that the finance is paid off prior to paying the seller the balance.

CGI Proponix

supports SCF

through both their

traditional trade

finance instruments

and through

Authority to Pay and

Open account

Platforms

CGI Proponix



57

PO and Invoice Data Management• Integrates PO and Invoice data download via TSU plus XML messages;• Links PO and Invoices to an ATP, Import LC, OAP, or export finance instruments;• Matches and tracks POs and Invoices, and provides PO balance and tracking data upload via XML message to the

customers ERP..

Key Technology Components aiding SCF

Invoices

Buyer Side Finance

" " "ATP(Invoice Only)

Open AcctPayment

Link, Match and Track

Buyer Bank Direct Seller FinanceBuyer Backed Seller Finance

Purchase Orders

ExpLC

Out.Coll.

Exp. BAs,DP ’s

& TAC ’s

Appr. toPay

(ATP)

ImpLC

IncomingColl.

Imp. BAs,DP’s

& TAC ’s

Buyer Side Finance Export Finance

The Proponix Technology Building Blocks for a SCF solution:

CGI ProponixSupply Chain Technology Components

CGI Proponix

critical component to their technology

is the ability to

manage Purchase

orders and Invoices

– linking, matching

and tracking for all trade instruments

supported.

Cornerstone

of the SCF

solution

Technology

Trade Finance Open account Traditional Trade Finance

PrimeRevenue



58

PrimeRevenue

Web site:www.primerevenue.com

Key GSCF Contact:

Dan Juliano, Business DevelopmentEmail: [email protected]

SCF Segment:

Key

StrengthsKey GSCF

Strengths

Solution

Overview

Background

Buyer Centric

SCF

Vendor Centric

SCF

Export SCF

Programs

Factoring /Invoice

Discounting

Vendor ManagedInventory /In-TransitInventory

Pre-

Shipment

Finance

Comprehensive

None

Specific Function

PrimeRevenue’s SCF Platform™ connects trading partners and financial institutionsaround a common view of future-dated financial settlement, linking supply chain events,the flow of funds and the flow of goods and services. PrimeRevenue’s SCF SupportServices complete its SCF Solution though Supplier sales & marketing, SCF analytics,program design, and global legal infrastructure services. The result is total workingcapital optimization – lower costs, working capital and financial risk throughout theglobally distributed supply chain driving improved profitability, and higher Return onInvested Capital (ROIC) for all supply chain participants.

• The PrimeRevenue SCF Platform operates as a single, global, closed loop systemfor all participants – buyers, supplies and financial institutions. It is currentlyoperational in 13 countries, processing transactions in 10 currencies.

• An open financial institution network which provides for greater scalability andsustainability of SCF programs. PrimeRevenue’s SCF platform supports multiple

liquidity options including buyer self funding, bank balance sheet lending, banksyndication and securitization through direct access to the capital markets.

• Market leading support services including supplier sales and marketing, SCFanalytics and program design as well as a full range of tools/training for treasury andsourcing/merchandising.

• Buyers can manage credit memos (ie, off-sets) through the system

• PrimeRevenue can support non-investment grade companies that would not

normally be able to roll out a supply chain finance structure to their suppliers

PrimeRevenue Inc. is the leading global provider of Supply Chain Finance (SCF)solutions with clients in North America, Europe, Asia and Australia. The companyprovides its SCF solution, which includes PrimeRevenue’s SCF Platform™ andPrimeRevenue’s SCF Support Services, to the distributed supply chains of Global 2000organizations and a network of financial institutions who support them.

PrimeRevenue



59

Scope and Functionality of Global Supply Chain Finance Solution


SOLUTION High Level PrimeRevenue Supply Chain Finance Process Flow



PrimeRevenue



61

Explain any unique and differentiating element to your solution?

A Global, Closed Loop PlatformThe PrimeRevenue SCF PlatformTM operates globallyand is currently processing transactions in 15 countriesand 8 currencies. Further, all supply chain participants

interact securely with a single platform globally.PrimeRevenue is a hosted, on demand solution,requiring minimal integration with buyers ERP andlegacy systems.

An Open Financial Institution PlatformThe solution is not proprietary to any single bank or group of banks. This supports the scalability,

sustainability, and efficient pricing for supplier financing. We have already partnered with 14 Financialinstitutions, including

Multiple Financing Structures for SuppliersIncluding Bank balance sheet lending, syndicationamong a group of banks and securitization directly tothe capital markets

Multiple Financing Options for SuppliersIncludes automatic financing, ad-hoc financing andparameter based financing.

Robust SCF Support ServicesIncluding Supplier Sales & Marketing, SCFanalytics, SCF program design and technicalsupport

Minimal Business Process ChangeThe PrimeRevenue SCF PlatformTM is designed tosupport client’s current business processes,including credit/debit memo and adjustmentprocessing.

Supplier Credit Risk ManagementThe PrimeRevenue SCF Platform™ dramaticallyreduces the need for supplier risk management.Our solution provides a sum-certain, date-certain,bankruptcy-remote asset for Financial Institutionsand the Global Capital Markets to purchase.

Legal Framework

The PrimeRevenue SCF Platform™ hassuccessfully processed receivables financetransactions in many jurisdictions, including theUnited States, Canada, UK, Germany, France,Sweden, South Africa, Australia and China, withperfection of interest in the receivable.PrimeRevenue’s legal framework and its financialinstitution partners enable the solution to achieve

this result.

“PrimeRevenue’s vision

is to be the standard

global platform for

processing Supply ChainFinance transactions.

We believe that as the

global economy

continues to be driven by

outsourcing, low-cost

country-sourcing and

asset efficiency,PrimeRevenue will be

poised to meet the

demand for global SCF

solutions for both pre

and post export financing

transactions.”

POINTS OFDIFFERENTIATION

Unique SCF features



62

Other Platform Provider Examples

– Demica – Demica is a provider of specialized securitization and invoice factoring services, providing consulting,

advisory and technology services to a diverse range of multi-national clients.Citadel is their main software product.

Originally the company was focused on software development (Citadel system) but they are now moving away from

being just a software provider to reporting services for trade receivable securitization.

– GT Nexus – GT Nexus is in the process of launching GT Nexus Trade which includes PO Distribution (importers to

vendors), Vendors 'flipping' the PO into Commercial Invoice, Packing List, Shipping Order, Cert of Origin etc,

presentment of documents to banks to meet terms of LC or Open Account; Facilitation for banks of data / document

matching; capture of invoice status / payment date from banks for visibility by vendors (are my invoices approved /

when will I get paid); and by importers (when do I need to fund accounts for payment). Because we do have all of

the physical supply chain connectivity and data, our solution will allow banking partners to offer their customers

(either the importer or vendors) a number of Supply Chain Finance solutions including (a) pre-shipment, (b)inventory, and (c) post shipment financing.

– OB10. OB10 is a successful e-invoicing international network that operates a global business-to-business e-

Invoicing network. The capability enables members to send or receive invoices effortlessly between themselves

without having to agree on formats, file specifications or communication methods, thereby increasing the efficiency

and effectiveness of the invoice-to-pay process.

– Orbian – Orbian is a post shipment finance and receivables finance model. Orbian provides suppliers with an on

line payment option in which they can use 'approved' buyer invoices to receive payment or can be discounted

immediately into cash, in whole or in part, as required.

– TradeCard- Suppliers can request pre-export financing on an approved purchase order to get the working capital

they need to produce the order. A purchase order is signed by both buyer and supplier in the TradeCard system



63

Section B

II. Transactional Risk Managers

InStream Services



64

Web site:www.instreamfinancial.comKey Contact:

Tom Cross(248) [email protected]

• No one buyer or financial institution can absorb the credit risk or requirementsof supply chains that span not only multiple tiers but many different countries.Legacy SCF approaches lean heavily on the buyer to take the supply chainrisk, and are therefore, very limited in scope and scalability. ISS does nottake the same approach.

• ISS services are unique in that they can be offered with or without the buyer committing its own credit to support the funding positions of financialinstitution partners.

• In addition to its unique technology and risk management process, ISS alsoprovides expertise to help suppliers and buyers evaluate the benefits of itsservices and eventually execute a program as required to meet their uniqueneeds.

GSCF Segment:

InStream Services (ISS) provides a unique, web enabled service that enables avendor to easily and cost-effectively accelerate customer payments whenneeded. Due to unique risk management capabilities, InStream services can besafely applied at all levels of a supply chain working with many types of buyersand suppliers. ISS facilitates the delivery of unique working capital and riskmanagement solutions that can scale to the needs of any supply chain.

Key

StrengthsKey GSCF

Strengths

Solution

Overview

Background Instream was formed by Frank Hennessey (former CEO of Masco Tech andEmco) and Tom Cross (founder and President of Cresmark Bank and TriadFinancial). Instream is 100% owned by Hennessey Capital Solutions, Inc.

Today, ISS services are being applied in the automotive, heavy manufacturing,electronics, services and retail sectors.

Buyer Centric

SCF

Vendor Centric

SCF

Export SCFPrograms

Factoring /Invoice

Discounting


Pre-ShipmentFinance

Comprehensive

None

Specific Function

InStream Services

InStream Services



65

Step One: Validated invoice, credit/debit andremit information required to support receivablepurchase transactions with suppliers is sent toISS on a daily basis. This can also be providedthrough the buyer website.

Step Two: ISS aggregates supplier receivablesale requests based on web selection or pre-setsupplier control parameters.

Step Three: ISS creates the payment file entriesand establishes funds to cover purchases.

In parallel, ISS creates payment file entries for any normal term buyer payments distributingdollars as appropriate to cover lending partner positions and/or to earmark dollars as passthrough payments to suppliers if they are

unassociated with early pay transactions

Step Four : ISS issues the payment file to thecash management bank with electronicpayments being processed that evening.Suppliers also receive access to requiredremittance information for cash application.

PRIMEREVENUE PROCESS STEPSHigh Level InStream Supplier Finance Business Model



SOLUTION

3

1

2

4

3

4

3

4

program purchase period

early pay instructions

buyer infoavailable

invoice line item detailpayable & payment info

buyer paymentat term

buyer ACHat normal

term

funding request

ISS fundingpartner SPEs

reimbursementfor advances

funds for advances

paymentinstructions for

advances &pass throughs

cashmanagement

bank

ISS servicing &transactional risk

management820 like

remit detail

820 like remit detail

100 % less fee for early pay

advances and/or 100% for pass

through payments

supplier shipment

associatedsupplier invoices

buyer

receivesshipment

suppliers

supplier invoicesvalidated

2-5

days



InStream ServicesVi i



67

The advent of Visa drastically accelerated cash tosupport B2C transactions to the point of drivingworldwide business growth that is enjoyed as a major engine of prosperity today. Conversely, in the B2Bsector, the inefficient flow of working capital within and

across supply chains (B2B) is a real risk and barrier toexpansion of commerce both domestically andinternationally.

Buyers are pushing to pay on consumption terms whilemore WIP and inventory is caught in the product cycledue to supply chains that span continents. International

manufacturers deliver cost efficiencies, but raiseproblems of logistics, performance and credit risk.Suppliers caught in the middle are seriously challengedto successfully manage international relationships whilemeeting Buyer expectations. The acceleration of globalcommerce is raising supply chain finance risk tounprecedented levels. Fundamentally, the flow of

working capital is not keeping up with the growth of sales activity.

In order to accelerate working capital flow, B2Btransaction information must be accessed, shared andevaluated in a very efficient manner. B2C credit cardtransactions are evaluated and funded in micro-secondswith robust tracking and auditing mechanisms in place to

follow the life of the transaction from initial funding toreceipt of buyer payment. B2B must adopt some of these characteristics of the B2C world. However, a B2Btransaction can be more complex as it may go throughseveral or more transformations spanning multiplecountries, buyers and suppliers during a product lifecycle. In B2B, the technical and process challenges to

deliver “just-in-time” working capital is moresophisticated.

The InStream mission is to accelerate B2B globaleconomic expansion by providing unique automation andprocesses to gather and evaluate transactionalinformation to support “just-in-time” delivery of workingcapital to supply chains.

We believe that our major, strategic partners will belarge, global financial institutions to provide the breadthof global experience and funding required to trulyaddress an international need. Our solution will also beviewed as a unique value to hubs of electronicallytransacted buyer-supplier B2B activity enabling ISS toleverage the automation already developed and

accelerate our strategic vision.

What is your management vision for the GSCF space?VISION

Vision

UPS Capital



68

UPS Capital

Web site:www.upscapital/solutions/gscf

Key Contact:

Scott Mower, Managing Director Global Supply Chain FinanceTel: [email protected]

UPS merges transportation and logistics with funds through its financing arm, UPSCapital. The integrated solutions allow corporations to manage their global orders,control global shipments and optimize global finance.

UPS is building solutions to synchronize transportation with key supply chainprocesses like financing to help their customers achieve untapped financial benefitsfrom having assets and inventory overseas.

UPS’s import and export targets coincide with the transportation lanes that arestrategic to UPS Supply Chain Solutions. These include lanes to and from: Asia,Canada, Latin America, Eastern Europe and Western Europe

They are currently focusing on North America, Asia, Europe and U.K. UPS and UPSSupply Chain Solutions which will provide the physical movement of the goods havelocations and distribution centers worldwide.

Key

Strengths

SolutionOverview

Background

• One of the unique products offered by UPS Capital is Global Asset Based Lending.When a U.S. based customer has internationally located inventory, UPS Capital is ableto lend against that inventory, if the inventory is positioned in a UPS distribution center,or is in transit using UPS transportation capabilities. UPS’s control of the goods andvisibility enables the facilitation of funds when other lenders cannot.

• Enables middle market companies who generally have problems with their bank to

monetize non-USA domiciled inventory to increase liquidity.• If a company ships with UPS, can track the goods from point of factory loading untilpoint of destination, a critical competitive advantage in lending based on inventory.

• Can play a unique role as a transactional risk manager between logistics and finance

• Willing to put proportionate share of capital in supply chain finance transactions

• Offers the ability to tie cargo, credit and transaction dispute insurance through their own captive insurance

• The products offered by UPS Capital are appropriate for SMEs as well as Fortune 500.

GSCF Segment:

Buyer CentricSCF

Vendor CentricSCF

Export SCFPrograms

Factoring /Invoice

Discounting

Vendor ManagedInventory /In-Transit

Inventory

Pre-Shipment

Finance

Comprehensive

None

Specific Function

UPS CapitalGl b l S l Ch i Fi P d t S it



69

Global Supply Chain Finance Product Suite


By selecting UPS

transportation, a

whole range of financing

opportunities

open up with UPS

Capital’s Global

Supply Chain

Finance solutions.

UPS Capital focuseson the samesegments as their logistics company.Their key marketsinclude:• Retail

• Healthcare

• Industrial

Manufacturing

• High Technology

• Government

WORKING CAPITAL FINANCING

Payables Discounting

A payables discounting solution enables firms to outsource their payables process.Receivables Financing

By allowing UPS Capital to turn invoices into ready cash and assume the responsibilities andrisks of collections, a receivables management service may allow firms quick access to funds.Inventory Financing

An inventory finance solution may allow companies to invest money back into their businesssooner by enabling funds to be advanced earlier during a sale of goods.Global Asset Based Lending

Companies may be able to monetize their inventory of goods warehoused or in transit outsideof the U.S. and gain additional working capital at favorable rates.

SOLUTION

UPS Capital



70

Global Asset

Based LendingInventory sitting incompany’s internationaldistribution centers or other offshore DCs has noborrowing power because itis invisible to lenders or resides in legal jurisdictions outside the

credit policies of Assetbased lenders. By usingUPS’s supply chaincapabilities- warehousing,transportation, and logistics – to manage the flow of goods, UPS Capital, UPS’sfinancing arm, can convertoffshore inventory intocash.

Global Asset Based Lending Solution


Port of Entrance

CustomsTransit/NVOCC*

UPSWarehouse

Or CFS*Transportation/

Rail*Overseas factory

DAYS

0 60 70 100 110 120 180

Where traditional in-transit inventory begins within thesupply chain

3a. Using UPS - added financingAvailability on in-country inventory

2. UPS picks upat Supplier

3. Buyer isinvoiced

and takes titleto goods

4. UPS consolidates andships goods

5. Goods arrive atPort of entry

6. UPS arranges or provides transort

And providesgoods received

information

7. Delivers to:• UPS Warehouse

• Buyers DC• Buyers Stores• Buyers Factory• End Customer

8. Buyer paysUPS Capital

1. Purchase Order to Supplier

Distribution

Point*

Offshore / Overseas Domestic

*Note: Transportation assets are owned, operated or managed by UPS

SOLUTION

UPS CapitalVi i



71

The differentiator for UPS is that is also a logisticscompany and transportation company. The control,and information provided by UPS provides financialinstitutions the comforted needed to lend againstinvisible in-transit and overseas inventory

UPS Capital plans to partner with banks andtechnology companies to serve as the “translator”between the transportation/logistics industry and thefinancial industry. This will be done by using UPS’existing technologies showing shipments details, i.e.,location, verification of content, movement,interruptions, etc. UPS Capital will selectivelyparticipate in lending activities.

What is your management vision for the GSCF space?

What Data Management and Service do youoffer with your GSFC solution?

UPS has operating systems for each of our productlines; and we have integration tools that match themovement of funds with the movement of goods.

Does your platform provide transactionalrisk management?

The platform does provide risk management in that weare able to see detail of the shipment early in the

supply chain cycle, which enables UPS to fund earlier.

Supply Chain Technology Components

How does your platform track the physicalmovement of goods, if at all?

The system complete tracks the movement of goodswhether air, ocean, rail, ground, etc.

What can a corporation expect to pay toimplement your supply chain finance solution?

Pricing will vary depending upon financial needs of theclient, and the products required.

Vision

VISION

TECHNOLOGY



72

Section B

III. Risk / Liquidity Providers

Global Banks / Finance Companies



JPMorgan Chase

Merging the Financial and Physical Supply Chains



74

JPMorgan Chase is the only bank that directly links treasury functionswith logistics and global trade management services.

Our Integrated Supply Chain Management Solutions deliver process improvement, risk management tools and

working capital optimization generating positive results for our clients.

Merging the Financial and Physical Supply Chains

SOLUTION

Since both the

financial and logistics

flows begin with anunderlying purchase

order, our clients can

leverage their existing

systems for

management of

logistics and payment

mechanisms. Throughour holistic approach

to supply chain

solutions, our clients

realize business

process improvement,

optimize working

capital, and mitigate

risk. Our solutions

have the ability to link

buyers, sellers and

third parties

seamlessly.

JPMorgan ChaseS l Ch i M t S l ti



75

Supply Chain Management Solutions

Our solutions combine trade and logistics management serviceswith industry-specific expertise and state-of-the-art technology .

PO management

Trade document fulfillment

Duty calculation& minimization

Customs clearance

Regulatory screening and

automated license decisioning

Government reportingand agency/bureau interfaces

Event Management

Multi bank capabilities

Robust reporting tools

Imaging andarchiving capabilities

Expert advice on trade,

customs and supply chain

management

Process design and

optimization

Value chain management

Trade complianceassessment

Return on investment

and landed cost

Outsourced import and export

trade operations

Product classification

Trade compliance resolution

Special trade

program management

Brokerage and

broker management

Inventory management

Order management

Automation of

trade flows for L/C and

Open Account

Supply Chain financing

Inventory financing

Risk mitigation

Order-to-Pay

Visibility into the

entire trade flow

Exception/Discrepancy

resolution

Documentarycompliance review

Settlement

State-of-the-Art Trade Management Global Trade Managed Trade Finance

Technology Consulting Services

Real Time Global Trade Information Management

The Benefits of JPMorgan Chase’s Integrated SupplyChain Management Solutions



76

gLinking the Financial & Physical Trade Flows

Product

Decision Order Order

Fulfillment

Ship

Goods

Document

Review ComplianceDiscrepancy

Resolution

Payment

Approval Payment

Pre Export Finance Inventory Finance Post Export Finance

Import Trade

ServicesTrade Finance

Services

Export Trade

Services

Pre Entry andPost Entry

Services

Logistics

Management

Services

LogisticsManagement

Services

• Improved buy decision

• Unified supplychain collaboration

• Cost effective paymentalternatives

•Workflow efficiencies•Improved supplychain management

•Enhanced visibilityinto the supply chainflow

•Improved supplier relationships

•Accountable 3rd partyrelationships

•Duty minimization

•Improved inventorymanagement

•Risk mitigation

•Better management

reporting tools•Improved DPO

•Credit Enhancement

•Liquidity

•Supply Chain stability

•Risk mitigation

•Improved tradingpartner management

•Access to distributionchannels

•Satisfactory compliance& brand protection

•Improved DSO’s

•Cost savings

•Accurate documentpreparation

•Workflow efficiencies

•Landed costoptimization

•Audit and internalreviews

•Risk management

•Enhanced visibility

•Reduction inbusiness risk

•Minimized risk of penalties for noncompliance

•Improved datamanagement for customs entry

•Maximize duty savingsby screening againstprograms

•Accurate product costcalculation

•Improved visibility•Improved licensemanagement

•Better cost andperformance management

•Faster cycle timesfor delivery

•Improved management

reporting tools•Improved inventorycontrols

•Improved vendor management

•Simplified & improvedbroker management

•Streamlined regulatoryfiling

•Improved performance& process flows

JPMorgan ChaseIntegrated Supply Chain Management Solutions Deliver Results



77

Integrated Supply Chain Management Solutions Deliver Results

• Global Supply Chain Management at JPMorgan Chase spans the Western Hemisphere, Europe,the Middle East and Asia. Our ability to add value through integrating physical and financialsupply chains has helped our clients:

– Improve days payables outstanding (DPO)

– Improve visibility into trade flows

– Reduce days sales outstanding (DSO)

– Gain processing efficiencies

– Better manage working capital

• Some further examples of positive results experienced by JPMorgan Chase Supply ChainManagement solution clients:

– Achieved a 17% cost reduction in logistics spending for a diversified manufacturer with 19business units

– Realized approximately $3.5 million in duty optimization for engine manufacturer

– Reduced by 50% the ship-to-pay cycle time for a leading global parts manufacturer anddistributor

– Expedited export license process from 120 to 60 days for aircraft manufacturer

– Achieved 50% reduction in credit facility usage through implementing alternative tradepayment solutions for large import client

– Optimized working capital through extension of terms for larger retailer

– Shortened days sales outstanding from 40 to 9 days for a Fortune 500 company throughour document fulfillment solutions

Solution

Capability

JPMorgan Chase

Integrated Supply Chain Management Contacts



78

Integrated Supply Chain Management Contacts

For more information regarding JPMorgan Chase Global Trade Finance & Supply Chain Management solutions,

contact:

Michael Quinn

Senior Vice President, Global Trade Product Head

212.552.7730

[email protected]

Jonathan Heuser

Vice President, Supply Chain Management Sales Executive

212-552-7710

[email protected]

© 2007 J.P. Morgan Chase & Co. All rights reserved.



Santander GroupScope and Functionality of Global Supply Chain Finance Solution



80


Payables

Discounting

Open Model

Santander’s web-

based supply chain

financing

Drawing on its longexperience of this market,

Santander has developedits supply chain financesolutions to a highlyflexible and easy to useproduct, for which buyersand suppliers can accessa multi-language web-based bank portal from

anywhere in the world.

This structure works

equally well for both

domestic and

international trade.

Santander offers two forms of payer centric supply chain finance,based on reverse factoring: An Open Model and a Closed Model.

Open Model

Supplier decides if it wants financing


Open Model

Step One: The buyer sends to Santander an approvedpayables file (a whole range of formats being acceptable),specifying the future dates on which payments are to be madeto suppliers. All these payments are free of charge for thebuyer.

Step Two: Suppliers are given secure access toSantander’s web-based platform where they can view details of

the dates on which invoices are to be settled on behalf of thebuyer. Sellers can see full reference information, as well as theinterest rate proposed by the bank for early settlement.

Step Three: Santander takes into account the creditquality of the buyer in determining the discount rate applied tosuppliers. Once documentation has been completed, thesupplier can select on which invoices it wishes to receive early

settlement.

Step Four: Discounted supplier payments can be receivedat any bank account globally, as designated by the supplier. Atmaturity of each invoice, the bank either makes settlement tothe supplier on behalf of the buyer or is reimbursed for itsfinancing from the buyer’s funds for suppliers’ invoices whichhave already been settled early.

Closed modelSuppliers joining programme receive early payment on all confirmed invoices

at a competitive discount, providing maximum cash flow to suppliers

Seller

Seller

Seller

2. Approved

Payable file

4. Payment at

invoice

maturity

1. Original

invoices

Buyer

3. Discounted payment

against

individual

invoices

5. Payment at maturity if

invoice not

settled early

SOLUTION









Santander GroupSupply Chain Technology Components



85

Combination of Supply Chain Finance

with e-invoicing:

The combination of an experienced provider of supplychain finance and e-invoicing creates a powerful andholistic financial supply chain solution to meetgrowing demand for cost savings and improvedworking capital management. This is especiallyvaluable where the e-invoicing network can handlemultiple formats, using data translation to reformatfiles from one party to meet the requirements of the

receiving party. This approach minimizes the timeand cost of integration for participants in the e-invoicing network.

VAT compliance in multiple jurisdictions is a hugelyvaluable capability for any genuinely internationalsolution. Experience shows that probably the greatestbarrier to expanding an e-invoicing network is

encouraging suppliers to join. It is therefore importantto have a proven sales model of fast supplier on-boarding to accelerate adoption of e-invoicing andsupply chain finance.

Key Technology Components aiding SCF

Purchase Orders /Open Account

PlatformsEIPP

Letter of Credit /

Documentation

TransactionRisk Mgnt.

Payment /

SettlementSupport

Comprehensive

None

Specific Function

TechnologyFunctionality:

Supply Chain Technology Components

TechnologyIndustrial scale web-based platform

Santander already has a proven scaled web-

based platform in multiple languages that canbe accessed globally for supply chain financingand factoring.

e-invoicing Functionality

Successful e-invoicing solutions should includea many-to-many network, paper invoiceconversion into electronic invoices, multi-format data translation, multi-jurisdictional VATcompliance, PO distribution, PO flip, matchingwith invoices, ERP reconciliation, deepintegration into buyers' / suppliers' ERP or simple web portal upload / keying.

Payment Hub

Santander is developing a Payment Hub toenhance the Group's ability to ensure improvedefficiency in the capture and processing of bulkpayment and collection files from major customers.

.

Credit RiskManagement





HSBCSolution Capability



88


HSBC Supply Chain Finance services

Typical SCF Service

HSBC provides a range of blended, Supply

Chain Finance services for a number of large

corporates, based in North America and Europe,

with strong international brands and a growing

supplier base in the Asia Pacific region.

Transaction Management Support

HSBC can provide an element of transaction management notably electronic purchase order and invoice

distribution, matching and reconciliation to accelerate “authority to pay” processes, in a range of open

account relationships with suppliers. Document and data matching can be effected manually, using

imaging technologies or via HSBC’s sophisticated on-line reconciliation engines.

The SCF Solution

HSBC can provide a range of pre and post-shipment financing instruments for suppliers. Supplier

financing can be made available at a number of pre-agreed supply chain events. For example at purchase

order issue or acceptance, receipt of an ASN or an outbound inspection certificate, at invoice

presentation, GRN receipt, based on an inbound inspection certificate, approved invoice, or payment file.

Over 40 potential trigger activities have been identified along a typical supply chain.

Solution

Capability

HSBC has identified over 40 potential

trigger activities along a typical supply chain.

“In our experience although

technology is important, the

successful implementation

of SCF projects requires

strong project management,

effective change

management and some

process redesign, helping

customers with business

case development, internal

and external stakeholder

engagement and supplier enablement (enlightenment,

engagement and

implementation). These are

important pre-requisites for

success.”

HSBCAreas of Differentiation



89


Focused Team of ExpertsOur global Supply Chain Business team has SCFspecialists in the HSBC offices in New York, London,Paris, Düsseldorf, Hong Kong and Shanghai. These

teams quickly pull together the relevant financing andtransaction management specialists required to cover the appropriate SCF solutions for importers or exporters.

Flexible to Adapt to Client Needs A number of HSBC customers are pushing hard towardspaperless straight-through processes but a fair amountalso recognize the need for a stepped approach that

recognizes different levels of e-maturity within parts of their own business and in the suppliers. To cater for this,HSBC can provide a mix of support based on paper,imaged or digital platforms and processes.

In almost all cases, our customers want solutions thataddress their specific supply chain management issuesand recognize the idiosyncrasies of their SCMprocesses and their relationships with their suppliers.These requirements may be shaped by advice receivedfrom auditors in respect to accounting treatment or maybe as a result of a specific approach to supplier relationship management. HSBC can provide a range of non-recourse and recourse finance from both the buyer and supplier perspective and tailor solutions to meetspecific customer requirements.

Global Solution but ability

to localize platformsHSBC has developed a number of SCF platforms tomeet the needs of customers in specific markets

notably in Mexico, Brazil and Korea.

Blending traditional trade, receivables

and payables finance servicesHSBC is working hard to improve and blendtraditional trade, receivables and payables financeservices with risk, transactions, payments and cashmanagement products to provide customers withintegrated Financial Supply Chain Managementplatforms and best of breed Supply Chain Financeservices.

Points of

Differentiation



Royal Bank of Scotland (RBS)



91

Web site:www.rbs.comKey GSCF Contact:

Lionel Taylor, Head of Trade Supply &Chain, International Banking at RBS.

GSCF Segment:

RBS provides an extensive and comprehensive range of supply chain financesolutions for buyers/ importers and suppliers/exporters, which assist our customersand their trading partners to reduce cost and provide working capital through thesupply chain.

The Bank has a wide franchise over all customer segments from Multi Nationals toSME companies. RBS combines this knowledge to structure balance sheet friendlysolutions to meet the financial supply chain requirements of the large corporate andour skills and expertise in the middle and SME markets to provide a wide range of invoice finance and debt finance solutions.

The Royal Bank of Scotland Group ("RBS Group") is one of the world's leadingfinancial services companies providing a range of retail and corporate banking,financial markets, consumer finance, insurance, and wealth management services.RBS Group operates in Europe, the US and Asia Pacific serving more than 36million customers world-wide and employing more than 140,000 people. In additionto the provision of a full range of banking services under The Royal Bank of Scotlandand NatWest brands, RBS Group also includes Citizens Financial Group in the USAand Ulster Bank in Ireland.

Key GSCF

Strengths

SolutionOverview

Background

• RBS has a very strong presence in providing working capital finance solutions andservices to all sizes of business to meet their supply chain funding costs.

• RBS is the largest provider of banking services and structured financing to mediumand large businesses in the UK.

• It is a growing provider of debt financing and risk management solutions to largebusinesses in Europe and North America and is a provider of a range of productsand services to small, mid-sized and large corporate and institutional customers inthe UK and overseas.

• RBS is also Europe’s premier invoice finance provider with extensive knowledge of supplier requirements and also regional and local legal and regulatoryenvironments.

Buyer Centric

SCF

Vendor Centric

SCF

Export SCF

Programs

Factoring /Invoice

Discounting


Pre-ShipmentFinance

Comprehensive

None

Specific Function

RBSScope and Functionality of Global Supply Chain Finance Solution



92


RBS Supplier Finance – leveraging the Buyer relationship

The RBS Supplier Finance solution is a payer centric ‘reverse factoring’ solution primarily aimed atimproving working capital and releasing cash flow for customers by:

• Reducing the financial impact on suppliers of moving to open account trading terms• Accelerating payment to suppliers through early settlement of buyer specific invoices• Leveraging the Buyer’s credit strength, procurement and financial controls to provide cost

effective finance to their suppliers• Minimising changes in process and procedures for all parties

RBS Supplier Finance can provide finance earlier at very competitive rates for all suppliers. For domestic supply chains, early settlement of the invoice is the main requirement. For international supply chains, access to pre-shipment finance is often a dependency to theacceptance of open account trading. Also, associated working capital and cash flow benefitsare greatly improved if alternative forms of finance are made available.

The RBS Supplier

Finance solution

supports the full tradecycle, including:

1. pre-shipment

finance based on

confirmed Purchase

Orders;

2. post-shipment

financing based on

shipping activities

and associated

documentation;

and

3. early settlement of

the invoice at the time

of approval.

SOLUTION

P.O. or

L/C Issue

Order

AcknowledgedProduction

Doc Prep /

Ship

In-Transit /

Customs

Cleared

Order

Received /

Verified

By Buyer

Invoice

negotiation /

Approval


RBSScope and Functionality of Global Supply Chain Finance Solution



93


The RBS Supplier

Finance solution is a

streamlined and easy to use web based

service that

minimises effort and

changes to existing

practices for both

Buyer and their suppliers.

RBS Supplier Finance Process

Pre Shipment Finance Required: Where pre-shipment finance is required, the Buyer sends to the Banka copy of the confirmed Purchase Order and the supplier is then offered pre-agreed finance by RBS or a localpartner bank.

In transit financing: Additional post-shipment financemay be offered to the supplier at the time of shipmentreflecting the reduced risk of non-performance by thesupplier.

Early Settlement Finance: Early settlement financeis offered when the Buyer advises RBS that a payable isapproved for settlement and the amount and due date.RBS offers the supplier early settlement of the payment.Details of any invoices, remittance information, discounts,debit or credit notes can be carried with the transaction.

Automatic Discount: The discount may happen

automatically when RBS is advised by the Buyer or thesupplier may manually select to discount. If the supplier chooses to take early settlement, the full value approvedby Buyer is settled after deducting pre-agreed discountcosts and any previously advanced pre-shipment or post-shipment finance. The value of the settlement isdiscounted at a rate reflecting the credit quality of theBuyer. The supplier receives funds earlier and often at asignificantly reduced finance cost. If the supplier does not

discount, the full value is paid on the due date.

RBS’s solution involves three key trigger

events across the financial supply chain

Seller 1 2 3

C o n f i r m

e d P O

D o c u

m e n t s

p r e s e n t e d

/

P r o o f

o f S h i

p p i n

g

A p p r o v

e d I n v o

i c e

Buyer

SOLUTION





Wachovia BankScope and Functionality of Global Supply Chain Finance Solution



96


• Wachovia Supply Chain Solutionstakes a ‘building blocks’ approach tosupply chain service delivery

• Approach emphasizes customization

of solution based on supply chaincharacteristics and financial objectives• Common areas of focus are:

– Operational Efficiency – Transaction Cost Reduction – Free Cash flow

Improvements

• Supply Chain Finance is an embeddedcomponent to the overall solution thatprovides working capital solutions for LC and Open Account Transactions.

• Supply Chain Finance can be supplier focused or designed to leverage thecredit standing of the buyer to providelower cost financing to the vendors.

• Financing programs utilize physicalsupply chain data (ASN, eFCR) toaccelerate document presentation andoptions for financing

• Wachovia’s Trade Exchange providesa single supporting technologyplatform for all transaction types

Supply Chain Solution Building Blocks

Wachovia has adedicated SupplyChain Solution

organization thatfocuses on analyzingcustomer’sinternational sourcing,logistics, andsettlement processesand providing solutionrecommendations that

generate hardfinancial benefits. Our focus is taking aholistic view of thephysical and financialsupply chainprocesses andaligning supply chain

programs with overallcorporate financialgoals. Wachovia callsthis their BuildingBlock Approach.

WachoviaScope and Functionality of Global Supply Chain Finance Solution



97


Wachovia’s solution involves three key trigger

events across the financial supply chain

Seller 1 2 3

C o n f i r m

e d P O

S h i p m e

n t /

I n v o

i c e G e n e

r a t i o

n

I n v o i c e

a c c e p t a n

c e

Buyer

• Pre Shipment Finance (PO Financing)

– Confirmed Purchase Order delivery via Wachovia Trade Exchange

– Financing approved via local bank relationships through online application – Optional credit enhancement provided by Wachovia

based on credit worthiness of buyer

– Direct Wachovia underwriting of Open Accountworking capital in select Asian markets

• Post Shipment (Factoring)

– Invoice created on Wachovia Trade Exchange from PO data

– Invoice and finance request presented electronically to localbank or directly to Wachovia

– Funding approval done directly online

– No buyer approval of payment obligation required

• Post Shipment (Approved Payable)

– Invoice and Shipping Documentation createdon Wachovia Trade Exchange

– Electronic ASN integrated into document creation engine for shipment data

– Documentation and finance request presented electronically through online application – Buyer payment approval completed online or via integration with buyer ERP AP system

– Financing can be structured as AR Purchase to preserve US GAAP accounting treatment

– Off balance sheet funding available through use of Wachovia securitization conduit

• In-transit Inventory Lending

– Provided for Wachovia’s Asset Based Lending clients


Confirmed PurchaseOrder delivery viaWachovia TradeExchange

Invoice created onWachovia TradeExchange from PO data

Wachovia SCF Portfolio

WachoviaScope and Functionality of Global Supply Chain Finance Solution



98

PO AcknowledgedPO

IssuedShipment/Invoice

GenerationInvoice Acceptance

Payment at

Maturity

UNDERLYING TRANSACTION FRAMEWORK and TRIGGER POINTS

Day 5 Day 30 Day 45

PRE AND POST SHIPMENT FINANCING OPTIONS

PO Delivered via Trade

Exchange; Supplier requestsfinance for production based onPO; Request forwardedelectronically to Wachoviapartner bank. Loan granted withrecourse to supplier. Optionalcredit enhancement available

Supplier presents invoice for

financing via Wachovia’s TradeExchange; structured asworking capital loan or receivable purchase by partner bank or Wachovia. Pre-shipment advance factored intofinancing amount.

Buyer confirms receipt of goods

and confirms paymentobligation. Accounts payableposted to Trade Exchange for discounting selection bysuppliers. Receivable purchaseby partner bank or Wachovia.

Day 1

Pre-Shipment Finance

Day 75

Post-Shipment Finance Payables Finance

Key Trigger points for GSCF solutions

Wachovia’s Building Block Approach helpsassemble the client needs into the best solution for them.

SOLUTION

Wachovia BankSupply Chain Technology Components



99

Key Technology Components aiding SCF – Trade Exchange Messaging Platform

TECHNOLOGY

• Secure, collaborative messagingplatform for supply chain visibility andtrade transaction processing

• Single, web-based application setsupports all trade transaction typesincluding Open Account and Letter of Credit

• Integrates with Buyer’s ERP systems for automated distribution andmanagement of PO information

• Suppliers can view and acknowledgepurchase orders, electronically createand present documentation for payment, and request financing on apre-shipment and post-shipment basis

• Enables suppliers’ local bankingpartners to collaborate online andprovide timely and efficient finance

• Integrates 3rd party logistics providersfor physical supply chain milestonesand document delivery

• Automates workflow and embedsfinancing options at different trigger points in the transaction

Wachovia's TradeExchangetechnology platformenables completevisibility into thesupply chain frominitial PO creationthrough the financialand physicalsettlement of thetransaction. Thecollaborative web-based technologyhas embeddedSupply ChainFinance triggers thatutilize PO, Invoice,or shipment data to

automate thefinancing requestand approvalprocess. Optionalcredit enhancementservices can beadded as part of financing workflows.

Wachovia BankScope and Functionality of Global Supply Chain Finance Solution



100


Trade Payable Program Case StudyCASE STUDY

The Situation Large US-based importer seeking tostreamline its supply chain and lower supply chain coststransitions from LC’s to Import Collections, Private Label LC’sand Open Account. The transition creates a need for workingcapital finance for vendors relying on LC’s for trade finance.

The Background Client is a US$3 billion specialty apparel retailer for women's apparel, accessories and casual

footwear in the United States. It operates over 2,300 retail stores and related e-commerce Web sites through multiplebrands in 48 states. The supplier base is heavily international. The client historically used bank issued LC’s as itsprimary trade settlement mechanism, but sought to transition suppliers to Import Collections, Private Label LCs(Corporate LC), and Open Account as a means to streamline its financial supply chain and lower transaction costs for suppliers. As part of the program, the client wanted to include Supply Chain Finance options for the suppliers in order to mitigate the working capital issues created with the transition from LC to the new transaction types.

The Solution Wachovia assisted in the design and implementation of a financial supply chain program that

included options for the desired transaction types and options for suppliers to use Wachovia’s Trade Exchangetechnology to increase the efficiency of operations. Wachovia provided a Transition Guide to facilitate the change for impacted suppliers. The program included a post shipment Supply Chain Finance option that provided a low costsource of financing to suppliers based on the transactional history and credit worthiness of the client.

The Bottom Line The program streamlined the financial supply chain processes for vendors while allowing for flexibility and customization. The result was significantly lowered transaction fees and provided suppliers access to

cheaper working capital.



ABN AMROScope and Functionality of Global Supply Chain Finance Solution



102


Inventory

Finance

and

ownership

Conduit

Securitisation,

syndication

and insurance

StructuredReceivable

Purchase

PO

Manager

Pre-shipment financing• Provides pre-shipment financing against confirmed POs in selected countries

including but not limited to Brazil, Turkey and Asia• Use of MaxTradTM’s Purchase Order Manager module to manage POs and the

related financing activity.

• Use logistics data to provide greater visibility and control

Receivable Purchase structures• Purchases selected receivables of clients with the objective to provide liquidity

• Available globally across North America, Europe, Brazil and Asia

• Solutions structured allowing legal true sale and off balance sheetmanagement under IFRS and US GAAP and are without recourse to the Seller

• Structures can be insured or clean risk

• Country specific solutions including Channel financing in India and Brazil wherethe solution is fully integrated into the Bank’s branch network in thosecountries.

Supply side receivable purchase structures• Purchases receivables from the suppliers of our clients to provide liquidity to

our suppliers and provide working capital relief to large Buyers• Leverages the end-to-end technological capabilities of ABN AMRO’s award

winning MaxTradTM portal• Uses our globally recognised Conduit Securitization and Syndication

capabilities to optimally manage large transactions

Factoring solutions• Select European and Asian countries through our partnership with our wholly

owned subsidiary, IFN

• SME and mid market client focus in Asia, Europe and Brazil

Focus industries areretail, technology and automotive, leveraging our global network and significant corporaterelationships in these

sectors.

GlobalSupplyChain

Business

Supply Side

Receivable

Purchase

Partnership

with

Factoring

SOLUTION

ABN AMROScope and Functionality of Global Supply Chain Finance Solution



103

Balancesheet and

capitalmanagement

Inventoryfinancing

Factoring Logistics

partnership

Existing financingprograms

• Receivablespurchase programstargeting Europe-

Asia and US-Asiaflows

• Pre-shipment loansin partnership withCommercialstrategy

Supply Chain Business

Insurance

• Underwritingstrategies for

large Supplyside deals• Conduit

securitization• Syndication• Insurance

INTERNAL

DEVELOPMENT

EXTERNAL

PARTNERSHIPS

• Partnershipwith IFN (ABN

AMROsubsidiary) for selectedEuropean andAsian markets

• Work with DHL,UPS or CEVA

• Widen the dealorigination base

• Use logisticsdata for innovativesupply chainstructures

• Evaluate 3rd partyintermediaries for

purchase of receivables

• Dedicatedpolicies with key

insurers• Used for receivablepurchase andinvoicediscountingstructures

ABN’s Supply Chain Business is extending into a broadoffering utilizing internal and external developmentsSOLUTION

ABN AMROCase Study



104


Financing the extended supply chain: Automotive case study

The SituationTier 3 suppliers had working capital constraints for extraction of raw materials (platinum).

The SolutionThe solution provided facilities to the entire supply chain competitively priced linked to the credit rating of the OEM. Pre-production financing therefore eases the company’s work-in-progress funding requirements enabling it to utilise Supply ChainFinance by the back-to-back use of pre-shipment loans and receivables purchase. This requires monitoring of POs andshipments especially for dilutions. The solution is improved by partnerships with Logistic Providers to enhance risk mitigation.

The Bottom Line ABN AMRO puts a lot more emphasis on the quality of the relationship between the anchor client and the counterparty and the

flow of funds.

Part Finished Product by sea

Controlled financingbased on POs and

actual deliveries Payment from OEM on duedate into loan account after delivery from Parts Supplier

Finished Goodsby road

Raw Materials

Tier 1 Supplier in

Eastern Europe

OEM in

Western

Europe

Tier 2 Supplier in

South Africa

Off-take commitment

16 week working capital gap

Global Reach

With offices in 56

countries and

representation on six continents, ABN AMRO

is able to help clients

manage their trade

portfolio and finance

their suppliers on a truly

global level.

Tier 3 Supplier in

South Africa

CASE STUDY

ABN AMROSupply Chain Technology Components



105

Administration Security Access

PO

Manager Invoice

Manager

Shipment

Manager

Warehouse

Manager

Discrepancy

Manager

Manages the

distribution,

storage

and statusof PO’s

Document Imaging, Reporting and Workflow

Supply Chain Portal

Administration Security Access

Invoice

Manager

Shipment

Manager Warehouse

Manager Discrepancy

Manager

Supply

Chain

Finance

Payment

Manages theability to

capture andgenerateInvoices.

Connects toSupply ChainFinance

Collects

transport data

and other

shipmentinformation

Collects

Warehouse

receipt data

essential for 3-way match

3-way matchingcapability

Facilitates therouting andresolution of mismatched

data

Enables

Receivabl

es

Purchase

Programs

Manages

the payment

instructions

for settlement

• Integrated and modular-based solution

- Integrates both Supply Chain Services and Finance with sophisticated technology• Centralized Data management

-Captures and manages data flows along the entire supply chain life cycle- Provides both buyers and suppliers with visibility to their PO, shipping, invoice, and payment data via a common platform- Stores PO data, tracks the shipping/warehouse information, performs reconciliation on shipment/warehouse to PO- Leverages the PO, advance shipment notice (ASN), and shipping data in the Supply Chain Services Module for pre-shipmentfinancing- Suppliers are funded throughout the supply chain with a decreasing cost of borrowing as more shipping data is madeavailable (as the risk of default on the transaction reduces)

No Upfront IT Costs As the Supply ChainPortal is a web-based solution hosted by ABN AMRO, there isno requirement for costly IT investment or lengthy implementationtimescales

TECHNOLOGY

Bank of Montreal (BMO) Capital Markets



106

Web site:www.bmo.comKey GSCF Contact:

Philippa Fitzsimons

Supply Chain & Trade SolutionsTel: 416 867 5786

GSCF Segment:

BMO Capital Markets has partnered with leading Supply Chain Finance platform andtrade technology providers to deliver specific, individualized business solutions to our clients which build on the strength and resources of BMO Financial Group. BMOoffers a full suite of traditional and non-traditional Trade Finance products andservices, and stand ready to develop new approaches in support of business needs.

BMO Capital Markets is Canada’s premier supply chain finance bank offering the fullarray of products, services, and technology infrastructure comprising Supply ChainFinance.

BMO Capital Markets is a leading, full-service North American financial servicesprovider offering corporate, institutional and government clients access to a competerange of products and services. This includes equity and debt underwriting,corporate lending and project financing, merger and acquisitions advisory services,merchant banking, securitization, treasury and market risk management, debt and

equity research and institutional sales and trading. With over 2000 professionals inoffices in 26 locations around the world, including 14 in North America, BMO CapitalMarkets works proactively with clients to provide innovative and integrated financialsolutions.

Key GSCF

Strengths

SolutionOverview

Background

Buyer Centric

SCF

Vendor Centric

SCF

Export SCF

Programs

Factoring /Invoice

Discounting

Comprehensive

None

Specific Function

• BMO Capital Markets has centres of expertise in key locations such as Mexico,Brazil and China along with a strong correspondent network of more than 3000

Financial Institutions.• Tradevenue Direct, our state-of-the-art portal powered by Proponix facilitates

document imaging and processing of payment/settlement under Letters of Credit,Collections, Approval to Pay (ATP), Open Account Payment (OAP) and exportfinance. The instrument’s transaction history and general reporting is accessibleon an ongoing basis. Proponix’s new supply chain finance enhancements extendand complement our other offerings. Our Bank Assisted Open Account providesfor document checking and/or data matching under open account transactions.

Pre-ShipmentFinance


Bank of MontrealScope and Functionality of Global Supply Chain Finance Solution



107


Export Solutions

A few examples of key product offerings:

Financing Exports

Risk Mitigation

SOLUTION

Import Solutions

A few examples of key product offerings:“We are constantly

reviewing our service

offerings and adding new features in

anticipation of client

needs. We combine

the best of traditional

trade products and

services with the

latest in technology and integration

capability to help our

clients realize their

ambitions.”

Sara Joyce, ExecutiveManaging Director andHead of IFI and TradeFinance

• Receivables discounting for commercial, mid-marketand corporate clients

• Pre-shipment financing on a select basis

• Use of private insurers can protect clients and offer asolution to convert receivables into cash earlier in thecycle

• In addition to an active Risk Distribution team, BMOprovides links to Government credit enhancement

agencies like Export Development Canada, Ex-ImBank, International Finance Corporation, Inter American Development Bank and many other multi-lateral agencies to mitigate tough risks.

• Payables financing in partnership with PrimeRevenue.BMO’s partnership with PrimeRevenue allows theBank to offer increased flexibility in managing workingcapital, real-time, on–line monitoring and tracking of accounts payable or receivable, and streamlinedpurchase order processing. Payables data can beuploaded seamlessly from a client’s own enterprisesystem directly to the robust PrimeRevenue platformwithout the need for expensive integration. BMO’ssupply chain solutions offered in partnership withPrimeRevenue create tangible value - compelling,easily quantified and quickly executed.

• Import and procurement processing solution which:

– Enhances workflow management and reducescosts

– Uploads transaction details to ERP systems – Provides comprehensive reports on all import

and procurement business

– Consolidates payments

GE Commercial Finance



108

Website:

www.ge.com

Key GSCF Contact:Edward S AlvarezGE Commercial FinanceWorking Capital SolutionsTel: +1-203-962-1565

GSCF Segment:

Key GSCF

Strengths

SolutionOverview

Background

Buyer Centric

SCF

Vendor Centric

SCF

Export SCF

Programs

Factoring /Invoice

Discounting

Comprehensive

None

Specific Function

Working Capital Solutions, a GE Commercial Finance business, provides tailored

global accounts receivable solutions for multinational corporations. We help

customers optimize their cash flow, transfer credit risk and enhance transparency

throughout their entire organization.

GE Commercial Finance is one of GE’s “growth engines” with lending products,

growth capital, revolving lines of credit, equipment leasing of every kind, cash flow

programs, asset financing, and more. With over one million customers in over 30

countries, GE Commercial Finance delivers global presence and local underwriting

expertise.

• Established as captive accounts receivable monetization and shared credit and

collection servicing provider for its GE’s industrial businesses. Delivering global

infrastructure and local presence to support “order to cash” needs of large

multinational corporations.

• Built single largest factoring network worldwide with non-recourse exposure todebtors in 100+ countries – covering the Americas, Europe, Middle East, Africaand Asia-Pacific. Offering global access through a single point of contact.

• Guaranteed performance on credit and collection service deliverables – broadindustrial expertise and applied Six Sigma discipline drive operating performanceand greater customer insight.


Pre-ShipmentFinance

GE Commercial FinanceScope and Functionality of Global Supply Chain Finance Solution



109


Liquidity and Risk Transfer

SOLUTION

Receivable management:

Comprehensive order-to-cash solution

• Credit decision making – assessing thecreditworthiness of clients’ customers and settingappropriate credit limits and terms

• Collection services – performing all order-to-cashactivities

• Order release management – conditioning inputprovisions and releasing

• Payment management – processing cash receiptsfrom clients’ customer

• Reporting – portfolio status, client ledger &operations

• Compliance – conform to legal and regulatoryrequirements

• Dispute resolution management – state-of-the-art

support system• IT systems & accounting – scalable systems

capable of accounting on clients’ general ledger

• Purchase portfolios of global accounts

receivable on a 100% non-recourse basis for debtor insolvency; recourse against commercialdisputes and fraud

• Available globally across the Americas, Europe,Middle East, Africa and Asia-Pacific

• Client’s customers can be in developed andemerging countries

• Potential true sale and off balance sheetmanagement

• Non-notification typically (discreet)

GE Commercial FinanceSolution Example



110


GE Commercial Finance Supply Chain Finance services

Key Issues

• Metals pricing volatility: price increase of 300%+ year-over-year • Price increases causing insufficient credit lines for obligors• Reaching limits on financial covenants with existing financiers• Significant pressure on working capital inhibiting• New equity investor looking for changes to enhance returns

Customer Pain Points• Constrained Working Capital – reached limits on non-recourse financing due to static structure with limited flexibility;

seeking partners capable of addressing pricing volatility• Non-strategic partnership – multiple solution providers structure slow moving and difficult to manage; seeking fewer

partners with global reach, infrastructure and financial strength

Solution:

• Purchase and manage accounts receivable globally via multi-year non-recourse account receivables factoring facilityBenefits:• One single system globally and a standardized credit and collection process• Greater clarity and predictability of cash flow• Ability to fully focus on growth• Higher debtor credit lines

• Off balance sheet management

Solution

Example

gCustomer

Background:

One of the world’sleaders in the

production and

finished metal

products with over

7,000 employees and

15 manufacturing

plants across Europeand Asia

Morgan Stanley



111

• Morgan Stanley are experts at pricing risk in the capital markets anddelivers the lowest cost of funding for Suppliers through the innovative useof the capital markets.

• The capital markets have substantial capacity to deliver a single global SCFsolution for buyers.

• They find that many suppliers use the system to mitigate credit risk and not

just for credit arbitrage.• Their deals do not unwind with credit rating downgrades and industry

problems. This is part of how they hedge their risk.• A credit of Aa3/A+/AA-, among the highest in the securities industry• Morgan Stanley funds their programs in the public markets using Morgan

Stanley's name and guarantee. When a bank underwrites a program, ituses credit capacity for that name, which is generally some percentage of its lending limit.

GSCF Segment:

Morgan Stanley’s delivers a complete platform for buyer centric supply chain

finance. Their program offer s low cost, price risk through securitization and isa true sale of receivable for the supplier. They harness the global capitalmarkets to provide low cost, market risk based pricing.

Morgan Stanly also provides specific capabilities around factoring and invoicediscounting.

Key

StrengthsKey GSCF

Strengths

SolutionOverview

Background Morgan Stanley are experts in pricing risk and do it most efficiently using their skill and resources in the global capital markets. They have come to recognizethere is a major opportunity in the mis-match of investment grade and noninvestment grade working capital requirements in the supply chain.

Morgan Stanley sells these solutions direct to corporates.

Buyer Centric

SCF

Vendor Centric

SCF

Export SCF

Programs

Factoring /Invoice

Discounting


Pre-ShipmentFinance

Comprehensive

None

Specific Function

Website:

www.morganstanly.comKey Contact:Roland Hartley-Urquhart –Vice PresidentMorgan Stanley | Fixed IncomePhone: +1 212 761-2487

Morgan StanleyScope and Functionality of Global Supply Chain Finance Solution



112


InvestmentGrade

Non-InvestmentGrade

ContractManufacturers

BrandOwners

Very Few, mostly verylarge Asian names suchas Hon Hai and Jabil

Dell

Hewlett-Packard

Motorola

Philips

Cisco

Flextronics

SCI-Sanmina

Solectron

Celestica

Credit Quality

Nortel

Xerox

Credit Ratings of Select Consumer Electronics Brand

Owners and Contract Manufacturers

Morgan Stanley’s program is targeted at supply chains where the contract manufacturers have ahigher cost of capital than their large buying partners. The higher cost of financing the contractmanufacturer is added to the supply chain. For companies with investment grade ratings, the cost

differentials between non investment grade suppliers, particularly overseas, can be significant.

5

64

100

0

20

40

60

80

100

120

Investment grade

suppliers

Non investment-

domestic

Non investment-

Overseas

Recent average 90-Day corporate bond spreads between

Major buyer and select major suppliers

Source: Supply Chain Management Review, Sept 06

Morgan StanleyAreas of Differentiation



113


Capacity for Supplier Financing

• Many SCF programs are financed by balancesheet lenders and subject to credit capacity

limits.• Negative impact on suppliers and stifles the

benefits that could flow from SCF.• Removing capacity constraints ensure that

Buyers can maximise the benefits of SCF

Buyer Credit Capacity

• Morgan Stanley’s financing structure does notutilize the buyer’s name in the capital markets

• Buyer’s credit capacity is not impaired byTReFS CDS hedging

Onboarding suppliers

• PrimeRevnue does this, but Morgan Stanleyhas unique capabilities, such as 100%electronic documentation for suppliers.They also have a global receivable purchaseagreement so we on-board vendors faster inall jurisdictions.

Global Solution

Morgan Stanley/PrimeRevenue solution will operate inevery jurisdiction in which corpoates do business,

including China / RMB and India / Rupee

SAS 70 Type II Certified

No competing SCF program has the SAS70 Type 1and 2 audit certification. The parties can rely on theinformation for their Sarbanes-Oxley reporting.Companies do not need to do an independent audit of their receivables / payables balances in their financialreporting without this certification.

Use of PrimeRevenue technology

PrimeRevenue’s combination of technology, solutionflexibility and supplier adoption services is unique• Achieved without software or maintenance

fees• Minimal business process change• Rapid deployment• No risk of long term commitment

POINTS OF

DIFFERENTIATION

National City



114

Key

Strengths

Key GSCF

Strengths

SolutionOverview

Background

Buyer Centric

SCF

Vendor Centric

SCF

Export SCF

Programs

Factoring /Invoice

Discounting


Pre-

Shipment

Finance

Comprehensive

None

Specific Function

GSCF Segment:

Web site:

NationalCity.comRory Kaplan, Vice President &Senior Product Manager Global Treasury ManagementTel: 216-222-9051Email: [email protected]

The National City Trade Payables Finance Solution provides both strong buyer andsupplier benefits.

Key Buyer Benefits:

• Fewer A/P inquiries and reduces check processing costs

• Improves management of working capital

• Operational cost savings

• Opportunity to improve returns on short term investments

Key Supplier Benefits:

• Significant procurement benefits to importers to provide new cashflow management flexibility to suppliers; helps maximize supplier value for buyer procurement initiatives

• Streamlines A/P and settlement processes at reduced cost while providingsecure access to online remittance details 24/7

• Provides cash and trade integrated reporting to help customers conductcash projections, better manage their payables and have a tool for generally

improved cash management

National City focuses primarily on the buyer centric, Trade Payable space for

Global Supply Chain Finance (GSCF). Trade Payables Finance solution enablesNational City clients to leverage web-based technology to optimize workingcapital efficiencies throughout their global supply chain. The Trade PayablesFinance solution creates a platform for buyers and suppliers to collaborate usingthe most efficient source of capital to replace the investment and manage the riskembedded in the global supply chain. Information transparency allows suppliersto save time, better manage capital and minimize risk.

Launched in 2006, National City works with the Prime Revenue platform to offer a suite of products called Trade Payables Finance solutions. As a result of theparadigm shift from traditional trade products to open account, our goal is toprovide a suite of products that serves strategic partners and technologyenablers. Therefore, National City focuses on open account processing andsupply chain finance.

National City

Trade Payables Finance Solution

Scope and Functionality



115

Trade Payable Program Case Study

The SituationBig Lots (NYSE: BIG) is the nation’s largest broad line closeoutretailer with over 1,300 stores in 47 states. Viewing its vendor relations and supply chain management as key components in itsoperational success, Big Lots sought to further enhance its customer value proposition and vendor experience through a reduction in

supply chain inefficiencies.

The BackgroundNational City (NYSE: NCC) has been actively engaged in re-engineering traditional financial relationships within the supply chain. Bychallenging the norms of trade and engaging stakeholders throughoutthe chain, we work with our clients to develop value-added solutions

and win-win scenarios. We have established a partnership withPrimeRevenue, a pioneer in platforms supporting supply chain finance -creating holistic solutions tailored to our clients needs.

The SolutionCreating an integrated Trade Payables Finance Solution usingPrimeRevenue’s platform, National City enhanced Big Lots’ vendor experience through an innovative supply chain finance program. In

developing this solution, we worked with Big Lots, its vendors andPrimeRevenue to leverage the strength of Big Lots’ credit profile. Therollout targeted both domestic and import vendors, many of whomutilized LC-based financing.

The Bottom LineBig Lots’ vendors have found an additional payment and financingvehicle which allows for more efficient and flexible financing. Big Lots

has recognized and shared in the efficiency gains.

As the Trade Payables

Finance field continues

to emerge, our ability to customize solutions

that bring together the

right mix of partners,

technology, financing

and ideas, will position

our clients to maximizevalue through their

global supply chains.

CASE STUDY

National CityPoints of Differentiation



116

POINTS OF

DIFFERENTIATION

Credit Risk ManagementThe principal value-add of our current solution is in

removing the cost-of-capital inefficiency at work withinthe supply chain. National City is positioned to mostefficiently underwrite the buyer’s risk of repayment andhave a low-cost source of capital to deploy in financingthat risk. At this stage, the buyer is in a better positionto underwrite the commercial risk of their supplier relationship and it is more efficient for the buyer tomanage that risk. As we continue to work through thesupply chain and develop the necessary logisticsrelationships, we hope to be able to efficiently injectourselves into this process as well.

Non Recourse FinancingTo maintain the accounting integrity of our TradePayables Finance Solution, our partner, Prime

Revenue, provides an important layer to the structure.Through this program, the buyer becomescontractually liable for a date-certain, dollar-certainobligation to the supplier. Our solution provides ameans for us to acquire that obligation directly from thesupplier.

Data TranslationNational City currently receives and stores uploads of purchase order data from buyers. The solutions includea data translator to facilitate data and imaging fileexchanges with customers.

Accommodate Small SuppliersTrade Payables Finance Solution allows National Cityto provide a financing solution with little reliance on the

wherewithal of the supplier. This solution providesefficiency through creating a structure that allows thebifurcation of risk; buyer risk vs. supplier risk; and alsoallows competitive pricing of these risk componentsbased on our position to underwrite and hold your riskmost efficiently. We are best positioned to underwriteand hold ‘buyer’ risk, and that is exactly what our solution enables.

GeographyWe believe the proprietary structure and componentsof our documentation enables us to offer this solutionto suppliers globally. However, perfection is an issuewhich varies by jurisdiction.

National City currently has in place and is continuing to build a solution that bundles together the necessary components to provide a holistic solution. The open architecture allows clients

to add or remove components to meet their specific needs.

National CityMessaging



117

MESSAGING

Buyer submits data onapproved invoices to the Trade

Payables Finance Platform.

1 Suppliers view invoice data andrequest early payment.

2

National City receives and reviewsearly payment requests.

3

National City providesfunding to Supplier.

Trade Payables Finance Platformsends banking instructions againstBuyer’s clearing account at maturity of invoice, paying the supplier or NationalCity, if invoice was discounted.

5

Trade

Payables

Finance

Platform

Trade

Payables

Finance

Platform

4

Messaging PlatformThe globalization of the economy, and technology have provided tremendous advancements in trade. The physicalsupply chain has evolved with these developments, while the financial supply chain has remained relatively stagnant.However, as we have seen elsewhere in the global marketplace, where there is an inefficiency, capital and competitionwill emerge to profit from and displace the inefficiency. These forces are now playing out in the financial supply chainand National City is committed to remaining at the forefront of these developments.

National CityVision



118

VISION What is your management vision for the GSCF space?

Data Management and ServiceProvides a variety of reports through the platform and itsWeb-based reporting tool. Additionally, both buyers and

suppliers are able to view their obligations, maturity dates,projected fees, etc. via the platform.

Remittance advice information, produced as payments, aresettled either on the day invoices are discounted to cash or when receivables reach their due date. Buyers may accessthe remittance information in the system as an Adobe Acrobat .pdf file or a .csv file which can be read by Microsoft

Excel or other popular spreadsheet packages.

Corporate Integration IssuesFor buyers, in order to populate the TPF Platformservice with payables data, a small payables extract

file is published to TPF Platform. For most buyers,configuration of this payables extract can beaccomplished within a few days to a week.

For suppliers, no software is required to purchase,install or configure TPF Platform. An Internetconnection and simple web browser are the only

requirements.

Key Technology Components Aiding SCF

National City sees the transformation taking place in tradefinance with demand for traditional trade finance flatteningand a significant movement to open account paymentterms. We are very much committed to the GSCFproducts, as evidenced by our partnership with PrimeRevenue, to offer trade payables finance products. This

partnership is a major component of the future of our trade business and we are continuing to explore newsupply chain finance solutions.

We work with supply chain thought leaders andexperienced technology providers as we evaluate newways to provide working capital optimization andfinancing solutions related to various events in the supply

chain.

The Trade Services Utility (TSU), offered by SWIFT,presents a new industry standard for banks to leverageand offer new services and solutions in the supply chain.Connectivity to customers plays a major role in being ableto capture and exchange data, giving banks the ability toprovide new services.

Banks, such as ours, are information providers. Supplyinginformation in new and meaningful ways is critical to their continued relevance and intermediation in the trade world.

We will play a more consultative role with our customers.To be able to analyze a company’s trade needs and offer solutions that will create efficiencies for them.



Who is Global Business Intelligence?

Global Business Intelligence (GBI), conducts proprietary and consortium international traderesearch programs. GBI works with importers, exporters, banks, insurers, logistic andtransportation partners and global trade management vendors on both a syndicated as well asproprietary basis.

GBI conducts the following syndicated trade research programs on a biannual or periodic basis:

– Importer Trade Payment and Finance Trends

– Export Financial Value Chain Trends

– Capital Adequacy and Trade Services

– The Who, What, and Where Guide to International Supply Chain Finance

– Who's Who Directory of Global Trade Management Vendors

– Financial Institutions Trade Operations performance review


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Whos Who Global Supply Chain Finance_Final

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